A heuristic for determination of optimal capacity of central storage

A system of one machine used to produce m products in batches and a central storage used for storing raw materials and finished products is considered. The system maintains enough finished products to assure no stockout will happen. The machine has a finite production rate greater than or equal to the demand rate for each product, and thus operates with periodic start-ups and shut-downs. For special case when set-up for each product requires time and every product is produced in every cycle, the best policy given limited storage space is determined, and total production cost as a function of set-up costs, carrying cost, storage cost, and material handling cost is presented. A heuristic is developed that determines “optimal feasible cycle time” such that production scheduling remains feasible, the capacity of the central storage is not exceeded, and the overall costs are minimized.