IE 401

Recitation #10 Solutions

Lot Sizing

Part a)
Silver-Meal:
Net requirements for a particular component over five periods are (45, 75, 105, 12, 50).
The holding cost is $2 per unit and the fixed ordering cost is $200.

C (1)=K=$ 200
C (1+ 2)=( K +h r 2)/2=(200+75∗2)/2=$ 175
C (1+ 2+ 3)=( K + h r 2+ 2h r 3 )/3=(200+75∗2+105∗2∗2)/3=$ 256,66

C(1+2) is chosen at this step and 45+75 = 120 items are ordered in the 1st period (to cover
periods 1&2).

C (3)=K=$ 200
C (3+4 )=(K + h r 4 )/2=( 200+12∗2)/2=$ 112
C (3+4 +5)=(K +h r 4 +2 h r 5 )/3=(200+12∗2+50∗2∗2)/3=$ 141,33

C(3+4) is chosen at this step and (105+12) 117 items are ordered in the 3rd period (to cover
periods 3&4).

5th period is covered by ordering in that period.

Period 1 2 3 4 5
Net Requirements 45 75 105 12 50
Order Quantity 120 117 50
Beginning Inventory 120 75 117 12 50
Ending Inventory 75 0 12 0 0
Holding Cost 150 0 24 0 0
Fixed Ordering Cost 200 0 200 0 200

Total Cost = 200*3 + (150+24) = $774

1
Part b)
Part Period Balancing:
Net requirements for a particular component over five periods are (45, 75, 105, 12, 50).
The holding cost is $2 per unit and the fixed ordering cost is $200.

Order #1: Starting from the 1st period…

Order Horizon - 1 Total Holding Cost ($)

1 0
2 150 (75*2)
3 570 (75*2+2*2*105)

We decide to order to cover periods 1 and 2.

Order #2: Starting from the 3rd period…

Order Horizon Total Holding Cost ($)

3 0
4 24 (12*2)
5 224 (12*2+2*2*50)

We decide to order to cover periods 3, 4 and 5.

Period 1 2 3 4 5
Net Requirements 45 75 105 12 50
Order Quantity 120 167
Beginning Inventory 120 75 167 62 50
Ending Inventory 75 0 62 50 0
Stocking Cost 150 0 124 100 0
Fixed Ordering Cost 200 0 200 0 0

Total Cost = 200*2 + (150+124+100) = $774

2
Part c)
Wagner-Whitin solution:
Net requirements for a particular component over five periods are (45, 75, 105, 12, 50).
The holding cost is $2 per unit and the fixed ordering cost is $200.

For period-1:
C 11=$ 200C 12=200+75∗2=$ 350C 13=200+75∗2+ 105∗2∗2=$ 770
C 14=200+75∗2+105∗2∗2+12∗2∗3=$ 842
C 15=200+75∗2+ 105∗2∗2+12∗2∗3+50∗2∗4=$ 1242

Therefore F(1) = 200$ It means that produce in period 1 45 units to cover only period 1.

For period-2:
C 22=$ 200C 23=200+105∗2=$ 410C 24=200+105∗2+12∗2∗2=$ 458
C 25=200+105∗2+ 12∗2∗2+ 50∗2∗3=$ 758

Therefore F (2) = min(c12; F(1)+c22) = (350; 400) = 350$

For period 3:
C 33=$ 200C 34=200+12∗2=$ 224C 35=200+12∗2+50∗2∗2=$ 424

Therefore F(3) = min(c13; F(1)+c23; F(2)+c33) = (770; 610; 550 ) = 550$

For period-4:
C 44=$ 200C 45=200+50∗2=$ 300

Therefore F(4) = min(c14; F(1)+c24; F(2)+c34 ; F(3)+c44) = (842; 658; 574; 750) = 574$

For period-5
C 55=$ 200

Therefore F(5) = min(c15; F(1)+c25; F(2)+c35 ; F(3)+c45; F(4)+c55) = (1242; 958; 774;
850; 774) = 774$

These calculations are summarized in the following ctv table:

1 2 3 4 5
1 200 350 770 842 1242
2 400 610 658 958

3
 3 550 574 774
4 750 850
5 774

Hence, we have 2 optimal solutions:

The 1st optimal solution:

Period 1 2 3 4 5
Net Requirements 45 75 105 12 50
Order Quantity 120 167
Beginning Inventory 120 75 167 62 50
Ending Inventory 75 0 62 50 0
Stocking Cost 150 0 124 100 0
Fixed Ordering Cost 200 0 200 0 0

Total Cost = 200*2 + (150+124+100) = $774

The 2nd optimal solution:

Period 1 2 3 4 5
Net Requirements 45 75 105 12 50
Order Quantity 120 117 50
Beginning Inventory 120 75 117 12 50
Ending Inventory 75 0 12 0 0
Stocking Cost 150 0 24 0 0
Fixed Ordering Cost 200 0 200 0 200

Total Cost = 200*3 + (150+24) = $774