Lot-sizing within capacity-constrained manufacturing systems using time-phased planning

Research on lot sizing has mostly assumed single echelon systems. Even when multiple echelon systems have been used, capacity constraints are seldom considered. However, in manufacturing capacity constraints can lead to significant queuing effects. Commonly used lot sizing policies like lot-for-lot (LFL) and period order quantity (POQ) do not take these effects into account. This research compares these policies with a fixed order quantity (FOQ) policy, within which lot sizes are based on minimizing estimated lot flowtimes at capacity-constrained machines. Simulation is used to study a small production and distribution network using time-phased planning. Results show that the FOQ policy performs better than both LFL and POQ when inventory levels and delivery performance are of concern