Chapter 1 Introduction .......................................................................................... 1

1.1 Industrial Structure...................................................................... 4

1.1.1 Production......................................................................... 5

1.1.2 Inspection and Quality Control........................................ 6

1.1.3 Marketing ......................................................................... 6

1.1.4 Finance ............................................................................. 7

1.1.5 Accounts........................................................................... 8

1.2 Production-Inventory System...................................................... 8

1.2.1 Background ...................................................................... 8

1.2.2 Job Shop, Batch and Mass Production............................. 9

1.2.3 Just-in-Time (JIT) Environment ...................................... 9

1.2.4 Material Requirements Planning (MRP) System.......... 12

Chapter 2 Batch Size........................................................................................... 17

2.1 Optimal Purchase Quantity....................................................... 17

2.1.1 Dealing with Shortages .................................................. 19

2.1.2 Partial Backordering ......................................................23

2.2 Optimal Production Quantity....................................................25

2.2.1 Allowing Shortages........................................................ 29

2.2.2 Fractional Backordering ................................................ 33

Chapter 3 Batch Size Relevance for Just-in-Time (JIT)...................................... 43

3.1 Production with Replenishment of Input Item........................... 43

3.2 Instantaneous Procurement .......................................................46

3.2.1 Sensitivity Analysis........................................................ 47

3.3 Including Shortages...................................................................48

3.4 Partial Backordering.................................................................. 52

3.5 Multiple Input Items .................................................................. 56

3.6 Frequent Delivery of Produced Items ....................................... 61

Chapter 4 Price Variation.................................................................................... 73

4.1 Temporary Price Reduction....................................................... 73

4.2 Sensitivity Analysis .................................................................... 78

4.3 Price Increase ............................................................................. 81

4.4 Generalized Model  .................................................................... 86

Chapter 5 Batch Size for Material Requirements Planning

5.1 Material Requirements Planning (MRP) Lot Sizing Techniques ................................................................................ 107

5.2 Allowing Backorders ................................................................ 114

5.3 Period Order Quantity Based on Integrated Ordering Quantity (IOQ) ......................................................................... 116

5.4 Temporary Price Discounts/Price Increases ............................ 117

Chapter 6 Multiproduct Manufacturing ............................................................. 123

6.1 Determination of Optimum Cycle Time .................................. 123

6.2 Allowing Backlog ..................................................................... 126

6.3 Different Cycle Time for Different Items ................................. 130

6.4 Fractional Backlogging ............................................................ 132

6.5 Shelf Life .................................................................................. 135

6.6 Incorporating Input Item Procurement ................................... 138

6.7 Flexibility in the Production Rate ............................................ 141

Chapter 7 Manufacturing Rate Flexibility......................................................... 149

7.1 Demand Variation ..................................................................... 150

7.2 Production Rate Variation....................................................... 153

7.3 Including Shortages .................................................................. 156