A Dynamic Lot-Size Model with Make-or-Buy Decisions

This paper considers a dynamic lot-size model with make-or-buy decisions. In each period, the production level may not exceed a given capacity, but the purchase is unrestricted. The costs for production, purchase and inventory are concave. The problem is to find a minimum-cost production and purchase schedule that satisfies known demands over T periods. After characterizing the form of an optimal solution, we present an O(T 5 ) algorithm when the production capacities are stationary. The algorithm is extended to the case where the capacities are integer multiples of a constant. The results are further extended to the cases of backlogging, bounded inventory, and capacitated purchase.

• 저널Management Science · 35(4) · 447–458
• 토픽Supply Chain and Inventory Management · Management Information Systems
• DOI10.1287/mnsc.35.4.447
• 저자Sang-Bum Lee, Paul Zipkin