Robustness of a production schedule to inventory cost calculations

Minimizing the cost of capital tied up by inventory is frequently an important management objective of production scheduling. The paper determines the optimal production schedule of a single machine sequencing problem for two cases; first when the cost of capital is calculated by periodic interest calculation, and second, when the cost of capital is determined by continuously compounded interest calculation. The results are derived for common due date and for different due dates situations as well. The robustness of the suggested production schedules to the method of interest calculation is proved theoretically and demonstrated with the example of a calendar manufacturer.