A cost saving technique for solving capacitated multi-stage lot-sizing problems

The scheduling of lot sizes in capacitated MRP-type manufacturing systems is a routine decision-making process. However, the interdependence between stages and the capacity interactions among all stages of a product structure create difficulty in finding the optimal solution. In this paper, a heuristic algorithm based on a cost saving technique is developed to deal with capacitated lot-sizing in serial and assembly production environments under dynamic demand over a finite planning horizon. THe proposed algorithm is programmed in the FORTRAN language in which three types of cost saving formulae are included to improve the solution during the computational process. The effectiveness of the heuristic is evaluated through comparisons with the optimal solution obtained from mainframe LINDO and with two existing heuristic methods. The results indicate that the proposed heuristic is close to the optimal solution and computational savings when compared to other two comparative heuristics are achieved.