Operations planning for a volume-flexibility manufacturer in a supply chain system under lumpy demand

A batch production system with volume flexibility in a supply chain, where a manufacturer procures raw materials and/or component parts from multi-suppliers in a lot and processes them into a single product, is considered in this research. We develop an optimal ordering and production policy for a volume-flexibility manufacturer under lumpy demand. First of all, a decision-making model is formulated for optimal production rate selection. In this model, production rate is perceived as a decision variable and unit production cost becomes a function of production rate. This model takes into account not only raw materials´ and finished goods´ inventory cost, but production cost as well. Then, a pragmatic computation approach is presented to solve the proposed model for special unit production cost functions. Finally, a numerical study is conducted to illustrate the solution and a set of data with ten problems is tested and compared.