A simple recovery strategy for economic lot scheduling problem: A two-product case

We examine strategies for recovering from machine breakdown or other forms of interruption in the Economic Lot Scheduling Problem and propose simple decision rules for recovery. Instead of considering inventory being held after production, we consider the scenario when work-in-progress or raw material arrives at a constant rate and the objective is to minimize the holding and set-up cost at the production facilities. This is mainly motivated by the use of third party logistic provider for storage and distribution of finished products in which the backorder and the associated cost may no longer be an important consideration. We first present the basic model under consideration. A probabilistic characterization of a general condition in which recovery to the original schedule is feasible is then presented. A special case of this result is given and discussed in the context of machine availability and utilization. We then focus on a two-product case and derive the optimal decision rules. It is shown that the resultant rules are independent of the duration and frequency of breakdown. Finally, a numerical analysis demonstrating the effectiveness of the proposed rules is presented.