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Int. J.

Production Economics 73 (2001) 41}49

Constraint batch sizing in a lean environment

John Bicheno, Matthias Holweg*, Jens Niessmann
Lean Enterprise Research Centre, Cardiw Business School, Aberconway Building, Colum Drive, Cardiw CF10 3EU, UK

The underlying research discussed in this paper is derived from a research programme along three tiers of an
automotive steel supply network. The main objective of the initial research was to pinpoint wasteful activities in the
supply chain, and in later stages, to develop solutions. The preliminary work involved mapping the dynamics of the
supply chain focusing on how the demand information is passed from the "nal customer back to the material suppliers.
Production scheduling approaches were found to be a main cause of distortion in the dynamics of supply chain, and the
initial studies led to proposals for scheduling improvements both within and between companies. These proposals
include changing the scheduling frequency in accordance to the speci"c demand patterns } coupled with the use of
kanban, changeover reduction, and total preventive maintenance. Speci"cally, the scheduling of batch operations in "rst
and second tier suppliers of the supply chain was identi"ed as a key problem area in further supply chain dynamics
analysis. Therefore, a new and holistic scheduling algorithm was developed, which will be presented and discussed in
theory and application.  2001 Elsevier Science B.V. All rights reserved.
Keywords: Batch sizing; Lean manufacturing; Production scheduling

1. The lean processing programme

The research discussed in this paper is based on
The &lean processing programme' (LEAP), a threeyear EPSRC and industry funded initiative aimed
at extending the lean production philosophy into
the automotive steel supply chain. In total, 11 companies of a three-tier supply chain to the vehicle
manufacturers are involved, as shown in Fig. 1.
The project was started upon the premise that
considerable productivity gains are to be made by
mapping and then managing a supply chain as an
integrated whole, and in particular from a system* Corresponding author. Tel.: #44-29-20-874-544; fax:
E-mail address: holwegm@cardi! (M. Holweg).

atic approach to waste removal along the chain [1].

Researchers at the Lean Enterprise Research
Centre at Cardi! Business School have developed
a set of &value stream mapping tools' for this purpose [2] which have been tested in various environments. The LEAP project involved a value stream
network from steel mill to the departure of components to the automotive assembly plants and includes a steel plant, two steel service companies,
and eight "rst tier suppliers operating more than
a dozen sites. The products are steel pressings and
welded components, ranging from under 0.5 to over
50 kg. A typical routing involves hot mill, pickling,
coating, slitting, blanking, pressing, welding, assembly, and painting, although many more specialist
process steps may be involved. Many processes are
batch driven due to changeover times involved.

0925-5273/01/$ - see front matter  2001 Elsevier Science B.V. All rights reserved.
PII: S 0 9 2 5 - 5 2 7 3 ( 0 1 ) 0 0 0 9 1 - 3


J. Bicheno et al. / Int. J. Production Economics 73 (2001) 41}49

is that companies in the middle of the supply chain

get &squeezed' from both ends } schedule instability
from some vehicle manufacturers and delivery uncertainty from the steel mill. This causes what the
LEAP team has come to refer to as the &reverse
ampli"cation' e!ect [9,10]. Some players o!ering
quantity discounts, which severely a!ect demand
patterns, worsen the e!ect.

2. Determining batch sizes + the practice

Fig. 1. The lean processing programme.

The research methodology and the mapping results have been reported, therefore will not be presented here ([2}5], respectively).
In summary, the performance of the supply
chain tends to be erratic due to the following root
causes [4]:
Demand distortion. Unstable and distorted demand
patterns, causing the &Forrester' or &Bullwhip' e!ect
[6,7], whereby orders are being ampli"ed through
the supply chain. Relatively small changes in demand lead the supply chain schedulers, who work
independently from one another, to make compensating decisions on inventory and batch sizing.
Batching. Both the "rst tier assemblers and the
steel service centres have changeover operation
times which are not insigni"cant, typically in the
range 30 minutes}1 hour. Batching of production
lots hence is inevitable, being a further source of
ampli"cation. This e!ect was initially described by
John Burbidge and became known in his &multiPhasing' or &Burbidge e!ect' [8].
Process instability within the supply chain. Several
press operations work to near maximum tonnage,
sometimes with dies that are temperamental and
di$cult to set. There is then an almost irresistible
temptation to overproduce: &If it is going well, keep
it going'. Both changeover and process instability
are being actively worked on in most companies,
but both e!ects are likely to remain troublesome
factors in scheduling for a number of years to come.
Steel mill delivery performance. The steel mill
shows a low degree of delivery performance and
reliability. The consequence of supply uncertainty

Across the steel components supply chain, a variety of di!erent manufacturing planning and control approaches are applied. The steel mill for
example uses several self-developed multi-stage
scheduling systems for the production of steel coils;
the scheduling problem involves the sequencing of
slabs in the hot mill, which must conform to a &cof"n' shape in terms of width and thickness and are
run in &campaigns'. There are uncertainties with
regard to yield and quality, and coils have to be
produced in "nite sizes not necessarily conforming
to customer order multiples. Slabs are converted
into coil which are sent on to skin pass and/or
pickling, which in many cases represent localised
capacity constraints. Bu!er stock, often in considerable quantities, is held between each stage and
in dispatch, but nevertheless, delivery shortages occur regularly, thereby encouraging customers to
in#ate their lead times. Coil is transported by truck
or train, which forms a scheduling problem in itself.
At Steel Service Centre level companies use
spreadsheet based scheduling systems for inventory
control and for the production of blanks from steel
coil. The scheduling systems also deal with determining the schedule of the coil slitting and the
blanking operations.
The "rst tier suppliers convert coil or blanks into
component parts, usually involving the stages of
blanking, pressing, welding and assembly, paint,
and dispatch. There are three types of scheduling
systems in use. One group uses classic MRPII,
driving the process through a master scheduling
(MPS) and capacity management (CRP) system.
These users load the MPS according to customer
orders and communicate the resulting material requirements directly to the service centres. Although

J. Bicheno et al. / Int. J. Production Economics 73 (2001) 41}49

daily call-o!s from the vehicle manufactures take

place, the schedule established at "rst tier supplier
level are mainly driven by internally generated forecasts, with a "nished goods bu!er taking up the
slack between forecast and actual demand.
Another group uses kanban with pull signals to
assembly, but uses MRP for medium term material
acquisition. This group takes demands directly
from some customers who have demonstrated
small variance between forecast and actual call-o!.
In such cases there is no MPS. However, for other
customers who produce more erratic and unstable
forecasts, these suppliers tend to produce according
to a smoothed schedule based on average or anticipated demand. A third uses their own &homegrown' spreadsheet scheduling system which loads
batches onto press and assembly, based on simple
&rules of thumb' or "xed period requirements
(FPR), as for example a &10-day batch policy'.
Scheduling in the middle of the supply chain is
a challenging problem, irrespective of the production control system employed. It can be said that
none of the approaches showed signi"cant superior
performance in terms of delivery and schedule stability. There is some inconclusive evidence to show
that MRP driven companies show increased WIP
and FGI levels compared to manual-spreadsheet
systems and kanban systems [5]. What appears
clear is that the performance of the scheduling
systems is heavily dependent upon the performance
of the customer (in relation to accuracy and stability of forecast, and upon the performance of the
supplier), in terms of meeting delivery requirements.
Nevertheless, batching decisions were identi"ed
as a major source for distortion of the information
#ow, as it inherently tends to alter any repetitive
and stable demand pattern. Erratic schedules in
turn were identi"ed during the mapping exercises
as being a major source of instability. Given that
demand instability and press reliability are already
being addressed, a remaining problem in participating companies is simply that schedulers are unsure of how to construct a good schedule, or even
what a &good schedule' means other than ability to
meet customer demands. We will assume that
a &good schedule' means meeting delivery requirements with minimum inventory and a maximum of


stability/repetitiveness to enable level schedules

across the supply chain.
Separate projects were set in progress addressing
the issues discovered with the objectives of improving press shop reliability, improving steel mill
performance, improving awareness and communication along the supply chain and to encourage
level scheduling.
Furthermore, a speci"c project was initiated to
analyse the potential of improving the lot-sizing
problem, such as the press shop scheduling process.
As pointed out earlier, the major issue at the press
shop is that the batch production distorts the information #ow and even can act as trigger for
demand ampli"cation [5]. This e!ect could also be
shown in a simulation experiment, whereby only
post-batching synchronisation of the operations
could stop the demand ampli"cation [11].

3. Determining batch sizes + the theory

Since around 1915 the EOQ/EBQ model has
been the classic approach to determine order and
product lot sizes and to set order intervals (replenishment cycles) for a single product. Almost countless modi"cations have been developed in order to
adapt the model to various real-world conditions.
The approach has two major advantages } one is its
simplicity, the other is the #atness of the function in
the EOQ &zone', which is the area around the
curve's minimum, where the total costs are rather
insensitive to deviation from the EOQ [12].
From a Lean perspective, two factors lead to
a reduction in batch size compared with traditional
thinking [13,14]. The "rst is that inventory costs
tend to be underestimated due to the non-inclusion
of intangible factors such as inventory covering up
quality problems, reducing visibility and generally
increasing the wastes of transport, motion, and
waiting (or lead time). The second is the preference
in lean plants not only to reduce changeover time
through SMED activities, but also to standardise
operations, thereby reducing the time variation at
changeovers. The signi"cance of this last factor will
become apparent.
Nevertheless, EOQ type models are useful
because of their simplicity and can be taken as


J. Bicheno et al. / Int. J. Production Economics 73 (2001) 41}49

an upper bound guideline for batch sizing

Taking this further, the JIT or lean thinking
philosophy has raised the question whether an optimal batch size could or should be calculated at all.
The ultimate target is to achieve one-piece #ow,
with batch sizes of one. Thus, batches should always be as small as possible. Changeover costs
should be shifted into "xed costs and should not be
part of any batch calculation [15]. Mahoney even
goes as far as claiming that &the amortization of setup
time is irrelevant when attempting to achieve a competitive advantage in customer responsiveness and
inventory position' [16].
The simple EOQ is, of course, related to a single
product with unconstrained capacity. Scheduling
"rst tier automotive presses by contrast is a multiproduct problem requiring considerations of capacity, demand rates, varying change over times as
well as inventory costs. In general, this problem is
referred to as the economic lot-scheduling problem
or (ELSP) [17].
A special case of the ELSP is the &pure rotation'
schedule in which each product is produced once in
each cycle or &campaign'. This is shown in Fig. 2,
schedule A. It is signi"cant that although a heuristic is available for this problem [17], none of the
companies had even heard of pure rotation or
ELSP, much less adopted it. Most companies do,
however, adopt a campaign type of schedule, with
each product being run once per campaign, although with inconsistent batch sizes from campaign to campaign.
The possibility of running high volume items
(&runners, repeaters') more often than low volume
(&strangers'), not only o!ers the potential of inven-

tory savings, but is also compatible with the lean

approach following short lead time #ow production. The contrast with pure rotation schedule is
shown in Fig. 2, Schedule B.
Bestwick and Lockyer [19] have proposed
a heuristic approach called &coverage analysis' to
the special case of the ELSP, where low usage items
are scheduled less frequently and high usage items
more frequently. This heuristic, however, uses
a "xed number of changeovers and cannot consider
part-speci"c change-over times. It is assumed that
total changeovers are limited to a number that is
below the "gure that would result from summing
up the &optimal' numbers suggested by EOQ calculations for each item. Bestwick and Lockyer claim
a typical saving of 25% in inventory by using the
heuristic. This model may be useful in some purchasing situations where order costs are uniform
and inventory carrying costs are constant, but is
unsuitable in an environment of high product variety and product speci"city, such as an automotive
"rst tier press shop [18].
Apart from varying changeover times of individual products, a signi"cant problem experienced
by companies in the LEAP programme is inconsistency of changeover times for a particular product.
This is a standardisation and control problem, of
no small signi"cance in the press shops involved in
the research programme. The researchers came
across a solution to this problem that has been
adopted in a small number of leading press shops,
to great e!ect. This approach is to use a "xed ratio
of changeover to run times, such as 10% for
changeover time and 90% for runtime, and to allow
for zero unplanned idle time. Planned maintenance
time is also speci"cally allowed for. The 90/10 ratio

Fig. 2. &Pure rotation' schedule vs. new algorithm.

J. Bicheno et al. / Int. J. Production Economics 73 (2001) 41}49

itself is subject of a forthcoming paper and will not

be discussed here, but the e!ect of this policy is to
immediately &surface' any over-runs in either
changeover time or run time. Having highlighted
the deviation, the root causes are immediately
sought. This, of course, is in line with classic Toyota-style &enforced' problem solving [14,20].
Moreover, these leading press shops were found
to complete a particular &campaign' or series of
products in a &nice round number' of days such as
10 days or 28 days so as to maximise the regularity
of both supply and delivery.
If it is accepted that a particular proportion of
time will be devoted to changeover and run
time within a speci"c and known period, then a
speci"c case of the ELSP can be stated. Given
a total changeover time for all products,
but individual setup times for each product,
what is the optimal production sequence (or set of
batch sizes) in order to meet demand and minimise

4. A new approach towards batch-sizing

Most production schedules were built on what is
known as the "xed period requirements (FPR)
model [21]. Press shop schedules are created in
"xed period intervals at each company, which vary
between 2.5 and 10-day cycles between the respective press shops. Each individual press shop uses
a "xed order cycle for all processed parts. As parts
are either "nished in one pressing operation or
whole press lines are set up for performing multiple
operations with one-piece #ow between the presses,
scheduling can be considered as a one machine,
n products problem.
From the discussion above, it appears that none
of the existing batch-sizing models is capable of
providing optimal or at least near-optimal solutions, as pressing operations are characterised by
long, product-individual changeover times, whilst
the overall available time for changeovers is limited. Hence, a new model had to be developed. The
objective was to minimise inventory by determining product-individual batch sizes and replenishment cycles under the constraint of limited
available changeover time. Di!erent changeover


times had to be considered, which prohibited the

application of the &coverage analysis' model.
Given that demand shows a reasonably constant
level over the planning horizon } the basic assumption of all EOQ-alike batch-sizing models } individual replenishment intervals (order cycles) result
directly from batch size calculations and vice versa.
For both batch sizes and order cycles the model has
to consider stocking limitations (e.g. limited warehouse space, stock deterioration).
As a result a batch-sizing procedure had to be
developed, which provides signi"cant inventory
savings without breaching existing capacity constraints. Basically, the new model assigns calculated
portions of the available changeover time to the
individual products. The number of replenishments
per type of product is the outcome [18].
In brief, the new algorithm is based around three
1. &Runners and Repeaters' are produced more often
and in smaller batches, whilst &Strangers' will be
produced less frequent and in larger batches.
2. The scheduling pattern is set to be as repetitive and
stable as possible in order to minimise demand
uncertainty in the supply chain and avoid triggering demand ampli"cation.
3. The total amount of time for changeovers is set as
a xxed proportion of the total time available. This
encourages discipline in terms of changeover
time, as well as reducing fear of loosing e!ective
capacity due to increased changeovers.
To apply the underlying algorithm four inputs
are required:
1. Value of the periodical demand per part (i.e. demand volume multiplied by the unit price or
value), < "D ;C .
2. Changeover times (i.e. time between last piece
from previous batch till "rst good piece of next
batch), S .
3. Overall available time to perform changeovers (i.e.
the amount of time that a company is able and
willing to spend on changeovers), A.
4. Length of the scheduling period (e.g. a month,
a quarter, or a year).
Thus, the new approach obviates the necessity of
knowing exact "gures for changeover costs and


J. Bicheno et al. / Int. J. Production Economics 73 (2001) 41}49

costs of carrying inventory. Changeover time reduction is fostered by the simple logic that shorter
changeovers can be scheduled more frequently
within a constrained overall available changeover

Within a given planning period the average inventory in terms of capital employed for item j is

Q " H.
The number of changeovers is a function of the
total amount of time spent on changeovers for the
respective item j:
N" H  ,
where S
is the total time spent on changeovers
for item j.
I " ; H ;D ;C .
H 2 S
This can also be expressed as
0I " ; H ;< ,
H 2 S
where < is the demand value for item j; de"ned as
the product of demand in units and cost per unit for
item j.
The total inventory is

" H ;<
2 S
H H 

1 s
 ;< #  ;<

2 S



4.1. Derivation of the new algorithm

I " Q ;C .
H  H
The batch quantity or batch size is

this simpli"ed case the optimal (minimal) inventory

can be determined as shown below:


A* S
where A is the total available time to perform
changeover actions.
To start "nding the optimal solution, the number
of items (k) will be limited to two (k"2). Assuming

All available changeover time should be used,
1 s
 ;< #

;< .
I "

 2 S
As A, s , s , < and < are given parameters the

function for calculating I
has now only one

variable: S
The lowest total inventory will occur when

De"ning the optimal solution for S
as S, that is

0"  "!  ;< #
;< .

Eq. (11) has two solutions, which will be denominated as S and S .

These are
S "
1#((s ;< /s ;< )




S "
 1!((s ;< /s ;< )


It can be proven that the second solution (13b)
always results in unfeasible numbers. Thus, the
amount of time, which has to be spent on

J. Bicheno et al. / Int. J. Production Economics 73 (2001) 41}49

changeovers for item j"1 in order to minimise the

total inventory is
(s ;<

0 S "A;
(s ;<
The solution expressed through Eq. (12) shows
the critical in#uence of the square root of the product of changeover time and demand value for each
item. Since the square roots determine the individual portions of changeover time to be spent on
each item (S
), they also determine the optimal
number of replenishments and therefore the batch
sizes and the length of the product-individual
changeover cycle times. To express the major importance of that factor it will be de"ned as &replenishment priority factor'.
Replenishment priority factor"RPF "


(s ;< "(s ;D ;C ,
where s is the length of time to perform one
changeover for item j, D the demand in units for
item j (per considered scheduling period), and
C the cost or value per unit for item j.
Although Eq. (12) has been deducted from the
simpli"ed two-item problem, it can be expressed for
any number of di!erent items [18]:
(s ;<
H .
H "A;
S "A;
(s ;<
The resulting optimal batch sizes are
Q"D ; H



Q"D ; H ; H
Therefore, the optimal batch sizes are a function
of all changeover times, all demand volumes, all
costs per unit, and the total available changeover


The theoretical optimal batch quantity provides

coverage for a non-integer number of days. In practice this "gure should be rounded to simplify inventory control.

5. Applying the algorithm + a component

The chosen case study is based on real data and
can be considered as a typical example for the press
shop batch-sizing problem found at "rst tier automotive suppliers. The example aims at demonstrating how inventory savings can be achieved by
applying the new algorithm.
As is the nature of the car industry, a typical "rst
tier supplier has a very limited number of customers, usually less than 10. The demand patterns
can be expected to be somewhat levelled in the long
run, although #uctuations in the day-to-day callo!s can be monitored [5]. Due to the high pressure
for cost reduction experienced by "rst tier companies, it is not possible for them to hold excess
capacity. In contrast, in the case of the chosen
example the company has frequently to schedule
overtime to handle unexpected orders or compensate for production interruptions caused by toolbreakage, raw materials shortage, etc.
The common scheduling practice at the press
shop in question is to apply a 10-day batch size
policy. That means, the batch size for each part is
calculated from the forecasted demand of the next
two weeks (10 working days). Short-term #uctuations in the vehicle manufacturers' call-o!s are
balanced by a two-day safety stock. Table 1 demonstrates the e!ects of the 10-day policy in terms of
the resulting inventory level.
The 3920 minutes that are planned for total
monthly changeover time on this press line have to
be regarded as the upper limit of time the company
is willing to spend on changeover actions without
running into overtime or neglecting maintenance,
etc. Thus, this number is the constraint to
any optimisation e!ort. Applying the new model to
this problem suggests the following solution (see

 Safety stock is not considered.








value of inventory:

Total setup times [min]:
Reduction of the average









[days cov.]
No. of
value of
No. of
value of



value of

No. of
No. of

RPF No. of setups

rounded to integers
Company 10-day policy RPF Theoretical
350to Press}Summary (Batch-sizing
horizon"40 days)

Table 1
Previous and revised schedules including projected inventory reductions

value of

J. Bicheno et al. / Int. J. Production Economics 73 (2001) 41}49

RPF No. of Setups adjusted to

&convenient' numbers


Table 1, columns 2}4). The above illustrated

example leads to a realistic 31.4% of savings in
inventory compared to the outcomes of the previous batch sizing policy.
Currently, the company is making progress towards a general reduction in changeover times,
with lead to expect further signi"cant savings once
the changeover times can be brought down to below 45 minutes, which has been de"ned as a target
level. A change in the batch sizing policy combined
with changeover time reduction could provide savings in inventory of about 60% compared to the
original situation.

6. Conclusion
In conclusion, preliminary research on the
dynamics of the information and material in the
automotive supply chain studied revealed several
types of distortion on both intra- and inter-company levels. Batch sizing in changeover constraint
operations was identi"ed as one source of distortion in supply chains, which was discussed in this
paper. The problem was addressed by developing
a new algorithm, as existing approaches were found
not to provide appropriate solutions.
The press shop scheduling problem has two important issues: batch sizing and sequencing, with
this research primarily focusing on de"ning &good'
batch sizing decisions. The improvement potential
of proper batch sizing techniques is signi"cant and
should alert every company operating in a repetitive batch production environment. The model has
been developed to minimise inventory levels under
constrained total capacity, whilst considering product-individual changeover times. The advantages of
a total target changeover time were identi"ed.
In general, applying the algorithm results in inventory savings of more than 10% without changeover time reduction, but the potential is far higher.
A study comprising four di!erent press shops with
over 40 presses in total showed a range of potential
savings between 4% and 35%, with an average
potential saving that has been well above 10% in
each of the surveyed companies. In those cases (i.e.
single presses) where relatively small improvements
could be realised, the processed items showed very

J. Bicheno et al. / Int. J. Production Economics 73 (2001) 41}49

similar "gures in demand value and changeover

times. Savings towards the top end of this range
indicate other di$culties such as untrained scheduling sta!, instability of demand, inventory record
accuracy, poor housekeeping and poor standardisation. In general, these symptoms should be
tackled "rst.
The application of the model is certainly not
limited to press shops in the automotive supply
chain, as it applies to any batch-driven operation in
any industry. For example, the model is now being
adapted to glassmaking and plastic injection
moulding, whilst at the same time aiming to extend
the implications of the model to all tiers of the
supply chain.

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