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A production model for a flexible production system and products with short selling season.pdf

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A production model for a flexible production system and products with short selling season.pdf

A PRODUCTION MODEL FOR A FLEXIBLE PRODUCTION SYSTEM AND PRODUCTS WITH SHORT SELLING SEASON MOUTAZ KHOUJA AND ABRAHAM MEHREZ Received 12 June 2004 We address a practical problem faced by many ﬁrms. The problem is deciding on the production levels for a product that has a very short selling season. The ﬁrm has a full period to produce and meet a lumpy demand which occurs at the end of the period. The product is no longer demanded after the end of the period. A constant production rate which minimizes average unit cost may increase holding costs. Varying the production rate at discrete points in time may increase production costs but may also decrease hold- ing costs. In addition, allowing changes in the production rate enables the incorporation of forecast revisions into the production plan. Therefore, the best production plan de- pends on the ﬂexibility of the production system and on the holding cost. In this paper, we formulate and solve a model of this production planning problem. Two models are developed to deal with two types of the average unit cost function. Numerical examples are used to illustrate the results of the model. 1. Introduction Consider the problem faced by a ﬁrm which produces a product for a full period to meet a demand which is concentrated at the end of that period. There is no demand for the prod- uct after the end of the period. This problem is common for many suppliers of products treated in the single period model [8]. However, unlike retailers, suppliers are not faced with the problem of discounting the product if any inventory remains at the end of the period [ 15], because they produce to the orders of the retailers. The problem for the sup- pliers is deciding on the production levels of products. A constant production rate which minimizes average unit cost may increase holding costs. Varying the production rate at discrete points in time may increase production costs but may also decrease holding costs. There