Setting Planned Leadtimes in Serial Production Systems with Tardiness Costs

Abstract

We investigate the problem of determining optimal planned leadtimes in serial production systems in which the actual procurement and processing times may be stochastic. The objective is to minimize the sum of inventory holding costs and job tardiness costs given a customer specified due-date. We present a general solution procedure for two stage serial systems, which for most cost structures and leadtime distributions is a single-pass algorithm. We also indicate how the procedure can be extended to N-stage systems. We present computational results which provide some insight into the characteristics of optimal safety time policies.