A Multi-Item Production Lot sizing Model with Stochastic Demand

Copyright © 2014 ISSR Journals. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. ABSTRACT: This paper presents a finite horizon Markov decision process model for determining the optimal production lot size (PLS) of multiple items with demand uncertainty. The model is formulated using states of a Markov chain that represent possible states of demand for items. Using weekly equal intervals, the decision of whether or not to produce additional units is made using dynamic programming over a finite period planning horizon. The proposed model demonstrates the existence of an optimal state-dependent production lot size as well as the corresponding production-inventory costs for items. A numerical example is taken to illustrate the solution procedure of the developed model