Forecast horizon for dynamic lot sizing model under product substitution and perishable inventories

摘要

This study investigates the optimal forecast horizon for a two-product dynamic lot sizing problem under the following conditions: (1) stock deterioration rates and holding costs in every period depending on the age of the stock and (2) possibility of one-way product substitution (i.e., one product may be used to satisfy the demand of the other product but not vice versa). We use two structural properties of the optimal solution as bases to develop a forward dynamic programming algorithm that solves the problem. The complexity of the algorithm is O(T-5), where T is the length of the planning horizon. We provide sufficient conditions to obtain the forecast horizon results by establishing the monotonicity of the order point. On an extensive test bed, we demonstrate the influence of a joint setup and substitution costs on a fixed-length rolling horizon that will enable the operations manager to dynamically update the duration of its horizon. (C) 2019 Elsevier Ltd. All rights reserved.