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ALTERNATIVES LOT-SIZING SCHEMES

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Presentation on theme: "ALTERNATIVES LOT-SIZING SCHEMES"— Presentation transcript:

1 ALTERNATIVES LOT-SIZING SCHEMES

2 Alternatives Lot-Sizing Schemes
The silver-meal heuristic Least Unit Cost Past Period Balancing

3 The Silver-Meal Heuristic
Forward method that requires determining the average cost per period as a function of the number of periods the current order to span. Minimize the cost per period Formula : C(j) = (K + hr2 + 2hr3 + … + (j-1)hrj) / j C(j)  average holding cost and setup cost per period k  order cost or setup cost h  holding cost r  demand

4 Method Start the calculation from period 1 to next period
C(1) = K C(2) = (K + hr2) / 2 C(3) = (K + hr2 + 2hr3) / 3 Stop the calculation when C(j) > C(j-1) Set y1 = r1 + r2 + … + rj-1 Start over at period j, repeat step (I) – (III)

5 Example A machine shop uses the Silver-Meal heuristic to schedule production lot sizes for computer casings. Over the next five weeks the demands for the casing are r = (18, 30, 42, 5, 20). The holding cost is $2 per case per week, and the production setup cost is $80. Find the recommended lot sizing.

6 Step I, II & III r = (18, 30, 42, 5, 20) k = $80 h = $2
Starting in period 1 C(1) = 80 C(2) = [80 + (2)(30)] / 2 = 70 C(3) = [80 + (2)(30) + (2)(2)(42)] / 3 = Stop the calculation as the C(3) > C(2) y1 = r1 + r2 = = 48

7 Step IV = 42 + 5 = 47 Starting in period 3 C(1) = 80
= 45 C(3) = [80 + (2)(5) + (2)(2)(20)] / 3 = Stop y3 = r3 + r4 = = 47

8 Since period 5 is the final period, thus no need to start the process again.
Set y5 = r5 = 20 Thus y = (48, 0, 47, 0, 20)

9 Least Unit Cost Similar to Silver-Meal method
Minimize cost per unit of demand Formula : C(j) = (K + hr2 + 2hr3 + … + (j-1)hrj) / (r1 + r2 + … + rj C(j)  average holding cost and setup cost per period k  order cost or setup cost h  holding cost r  demand

10 Method Start the calculation from period 1 to next period
C(1) = K / r1 C(2) = (K + hr2) / (r1 + r2) C(3) = (K + hr2 + 2hr3) / (r1 + r2 + r3 ) Stop the calculation when C(j) > C(j-1) Set y1 = r1 + r2 + … + rj-1 Start over at period j, repeat step (I) – (III)

11 Step I, II & III r = (18, 30, 42, 5, 20) k = $80 h = $2
Starting in period 1 C(1) = 80 / 18 = 4.44 C(2) = [80 + (2)(30)] / ( ) = 2.92 C(3) = [80 + (2)(30) + (2)(2)(42)] / ( ) = 3.42 Stop the calculation as the C(3) > C(2) y1 = r1 + r2 = = 48

12 Step IV = 42 Starting in period 3 C(1) = 80 / 42 = 1.9
= 1.92 Stop y3 = r3 = 42

13 Step IV = 5 + 20 = 25 Starting in period 4 C(1) = 80 / 5 = 16
= 4.8 y4 = r4 + r5 = = 25 Thus y = (48, 0, 42, 25, 0)

14 Part Period Balancing Set the order horizon equal to the number of periods that most closely matches the total holding cost with the setup cost over that period.

15 Example r = (18, 30, 42, 5, 20) Holding cost = $2 per case per week
Setup cost = $80 Starting in period 1 Because 228 exceeds the setup cost of 80, we stop. As 80 is closer to 60 than to 228, the first order horizon is two periods, y1 = r1 +r2 = = 48 Order horizon Total holding cost 1 2 2(30) = 60 3 2(30) + 2(2)(42) = 228 closest

16 Order horizon Total holding cost
Starting in period 3 We have exceeded the setup cost of 80, so we stop. Because 90 is closer to 80 than 10, the order horizon is three periods. y3 = r3 + r4 + r5 = = 67 y = (48, 0, 67, 0, 0) Order horizon Total holding cost 1 2 2(5) = 10 3 2(5) + 2(2)(20) = 90 closest

17 Comparison of Results Silver – Meal Least Unit Cost
Part Period Balancing Demand r = (18, 30, 42, 5, 20) Solution y = (48, 0, 47, 0, 20) y = (48, 0, 42, 25, 0) y = (48, 0, 67, 0, 0) Holding inventory 30+5=35 30+20=50 30+5+(2)(20)=75 Holding cost 35(2)=70 50(2)=100 75(2)=150 Setup cost 3(80)=240 2(80)=160 Total Cost 310 340 The Silver Meal and Part Period Balancing heuristics resulted in the same least expensive costs.

18 Exercise 14 – pg 381 A single inventory item is ordered from an outside supplier. The anticipated demand for this item over the next 12 months is 6, 12, 4, 8, 15, 25, 20, 5, 10, 20, 5, 12. Current inventory of this item is 4, and ending inventory should be 8. Assume a holding cost of $1 per period and a setup cost of $40. Determine the order policy for this item based on Silver-Meal Least unit cost Part period balancing Which lot-sizing method resulted in the lowest cost for the 12 periods?

19 Exercise 14 - pg 381 Demand = (6, 12, 4, 8,15, 25, 20, 5, 10, 20, 5, 12) Starting inventory = 4 Ending inventory = 8 h = 1 K = 40 Net out starting and ending inventories to obtain r = (2, 12, 4, 8,15, 25, 20, 5, 10, 20, 5, 20) a) Silver Meal Start in period 1: C(1) = 40 C(2) = ( )/2 = 26 C(3) = [ (2)(4)]/3 = 20 C(4) = [ (2)(4) + (3)(8)]/4 = 21 stop. y1 = r1 + r2 + r3 = = 18

20 Start in period 4: C(1) = 40 C(2) = (40 + 15)/2 = 27
Start in period 4: C(1) = 40 C(2) = ( )/2 = 27.5 C(3) = [ (2)(25)]/3 = 35 Stop. y4 = r4 + r5 = 8+15 = 23 Start in period 6: C(2) = ( )/2 = 30 C(3) = [ (2)(5)]/3 = C(4) = [ (2)(5) + (3)(10)]/4 = 25 Stop. y6 = r6 + r7 + r8 = = 50 Start in period 9: C(4) = [ (2)(5) + (3)(20)]/4 = 32.5 y9 = r9 + r10 + r11 = =35 y12 = r12 = 20 y= (18, 0, 0, 23, 0, 50, 0, 0, 35, 0, 0, 20)

21 b) Least unit cost Start in period 1: C(1) = 40/2 = 20 C(2) = ( )/(2 + 12) = 3.71 C(3) = ( ) /( ) = 3.33 C(4) = ( ) /( ) = 3.23 C(5) = ( ) /( ) = 3.51 Stop. y1 = r1 + r2 + r3 + r4 = = 26 Start in period 5: C(1) = 40/15 = 2.67 C(2) = ( )/( ) = C(3) = ( )/( ) = 1.75 Stop. y5 = r5 + r6 = = 40 Start in period 7: C(1) = 40/20 = 2 C(2) = (40 + 5)/(20 + 5) = 1.8 C(3) = ( )/( ) = 1.86 Stop. y7 = r7 + r8 = 20+5= 25

22 Start in period 9: C(1) = 40/10 = 4 C(2) = ( )/( ) = 2 C(3) = ( )/( ) = 2 C(4) = ( )/( ) = y9 = r9 + r10 + r11 = =35 y12 = r12 = 20 y= (26, 0, 0, 0, 40, 0, 25, 0, 35, 0, 0, 20)

23 c) Part period balancing
h = 1 K = 40 Starting in period 1  y1 = r1 + r2 + r3 + r4 = = 26 Order horizon Total holding cost 1 2 1(12) = 12 3 1(12) + 2(1)(4) = 20 4 1(12) + 2(1)(4) + 3(1)(8) = 44 closest

24 Order horizon Total holding cost Order horizon Total holding cost
We start again in period 5 y5 = r5 + r6 = = 40 Start in period 7  y7 = r7 + r8 + r9= = 35 Order horizon Total holding cost 1 2 1(25) = 25 3 1(25) + 2(1)(20) = 65 closest Order horizon Total holding cost 1 2 1(5) = 5 3 1(5) + 2(1)(10) = 25 4 1(5) + 2(1)(10) + 3(1)(20) = 85 closest

25 Start in period 10  y10 = r10 + r11 + r12 = = 45 y = (26, 0, 0, 0, 40, 0, 35, 0, 0, 45, 0, 0) Order horizon Total holding cost 1 2 1(5) = 5 3 1(5) + 2(1)(20) = 45 closest

26 Comparison of results Silver – Meal Least Unit Cost
Part Period Balancing Demand r = (2, 12, 4, 8,15, 25, 20, 5, 10, 20, 5, 20) Solution y= (18, 0, 0, 23, 0, 50, 0, 0, 35, 0, 0, 20) y = (26, 0, 0, 0, 40, 0, 25, 0, 35, 0, 0, 20) y = (26, 0, 0, 0, 40, 0, 35, 0, 0, 45, 0, 0) Holding inventory 12+2(4) (5)+20+2(5)= 95 12+2(4)+3(8)+25+5+ 20+2(5)=104 2(10)+5+2(20)= 139 Holding cost 95(1)=95 104(1)=104 139(1)=139 Setup cost 5(40)=200 4(40)=160 Total Cost 295 304 299 The Silver Meal resulted the least expensive cost.

27 Exercise 17 – pg 381 The time-phased net requirements for the base assembly in a table lamp over the next six weeks are The setup cost for the construction of the base assembly is $200, and the holding cost is $0.30 per assembly per week Determine the lot sizes using the Silver-Meal heuristic Determine the lot sizes using the least unit cost heuristic Determine the lot sizes using part period balancing Which lot-sizing method resulted in the lowest cost for the 6 periods? Week 1 2 3 4 5 6 Requirements 335 200 140 440 300

28 Exercise 17 pg 381 y4= r4 + r5 + r6 = 440 + 300 + 200 = 940 Week 1 2 3
h = $0.30 a) Silver Meal Start in period 1: C(1) = 200 C(2) = [200 + (200)(0.3)]/2 = 130 C(3) = [(2)(130) + (2)(140)(0.3)]/3 = C(4) = [(3)(114.67) + (3)(440)(0.3)]/4 = 185 Stop.   y1= = r1 + r2 + r3 = = 675 Start in period 4: C(2) = [200 + (300)(0.3)]/2 = 145 C(3) = [(2)(145) + (2)(200)(0.3)]/3 = Stop. y4= r4 + r5 + r6 = = 940 y = (675, 0, 0, 940, 0, 0) Week 1 2 3 4 5 6 Requirements 335 200 140 440 300

29 b) Least unit cost Start in period 1: C(1) = 200/335 = 0.597 C(2) = [200 + (200)(0.3)]/( ) = 0.486 C(3) = [200 + (200)(0.3) + (140)(2)(0.3)]/( ) = Stop. y1= r1 + r2 = = 535 Start in period 3: C(1) = 200/140 = 1.428 C(2) = [200 + (440)(0.3)]/( ) = 0.572 C(3) = [200 + (440)(0.3) + (300)(2)(0.3)]/( ) = Stop. y3= r3 + r4 = = 580 Start in period 5: C(1) = 200/300 = 0.67 C(2) = [200 + (200)(0.3)]/( ) = 0.52 Stop.  y5 = r5 + r6 = = 500 y = (535, 0, 580, 0, 500, 0)

30 c) Part period balancing
Week 1 2 3 4 5 6 Requirements 335 200 140 440 300 K = $200 h = $0.30 Starting in period 1 y1= r1 + r2 + r3 = = 675 Order horizon Total holding cost 1 2 0.3(200) = 60 3 0.3(200) + 2(0.3)(140) = 144 4 0.3(200) + 2(0.3)(140) + 3(0.3)(440) = 540 closest

31 Order horizon Total holding cost
Starting in period 4 y4= r4 + r5 + r6 = = 940 y = (675, 0, 0, 940, 0, 0) Order horizon Total holding cost 1 2 0.3(300) = 90 3 0.3(300) + 2(0.3)(200) = 210 closest

32 Comparison of results Silver – Meal Least Unit Cost
Part Period Balancing Demand r = (335, 200, 140, 440, 300, 200) Solution y = (675, 0, 0, 940, 0, 0) y = (535, 0, 580, 0, 500, 0) Holding inventory 200+2(140) (200) = 1180 = 840 Holding cost 1180(0.3)=354 840(0.3)=252 Setup cost 2(200)=400 3(200)=600 Total Cost 754 852 The Silver Meal and Part Period Balancing heuristics resulted in the same least expensive costs.


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