The effect of economies-of-scale on the performance of lot-sizing heuristics in rolling horizon basis

Date
2020-02-26
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Source Title
International Journal of Production Research
Print ISSN
0020-7543
Electronic ISSN
1366-588X
Publisher
Taylor & Francis
Volume
59
Issue
8
Pages
2294 - 2308
Language
English
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Abstract

In this article, we consider the production planning problem in the presence of (dis)economies-of-scale in production costs on a rolling horizon basis with a fixed forecast horizon. We propose variants of three well-known and commonly used heuristics (Wagner–Whitin, Silver–Meal and Least Unit Cost) adapted for this particular setting. In an extensive numerical study with demands exhibiting stationary, increasing and decreasing trends and seasonality, we demonstrate that having longer forecast horizon is less effective in obtaining more cost effective production plans when the production cost function is convex and also when fixed setup cost is lower, which both are proxy to lack of economies-of-scale.

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