Optimal production policy for a volume-flexibility supply-chain system

Abstract

A production-delivery system in a supply chain is always expected to reduce its overall production and management cost. In this research, a decision-making model is developed for optimal production rate selection in a single-stage supply chain system with volume flexibility, where raw materials and/or components are procured from suppliers and processed into finished products which are delivered to customers periodically at a fixed quantity with a fixed interval of time. In this model, production rate is perceived as a decision variable and unit production cost becomes a function of production rate. A pragmatic computational approach is presented to solve the proposed model for special unit production cost functions. Finally, a numerical study is conducted to illustrate the optimal solution and computational approach. © Springer-Verlag Berlin Heidelberg 2005.