Optimal lot-sizing/vehicle-dispatching policies under stochastic lead times and stepwise fixed costs

Alp O., Erkip N., Gullu R.

OPERATIONS RESEARCH, vol.51, no.1, pp.160-166, 2003 (Peer-Reviewed Journal) identifier identifier

  • Publication Type: Article / Article
  • Volume: 51 Issue: 1
  • Publication Date: 2003
  • Doi Number: 10.1287/opre.
  • Journal Indexes: Science Citation Index Expanded, Scopus
  • Page Numbers: pp.160-166


We characterize optimal policies of a dynamic lot-sizing/vehicle-dispatching problem under dynamic deterministic demands and stochastic lead times. An essential feature of the problem is the structure of the ordering cost, where a fixed cost is incurred every time a batch is initiated (or a vehicle is hired) regardless of the portion of the batch (or vehicle) utilized. Moreover, for every unit of demand not satisfied on time, holding and backorder costs are incurred. Under mild assumptions we show that the demand of a period is satisfied from at most three distinct production (dispatching) epochs. We devise a dynamic programming algorithm to compute the production/dispatching quantities and times.