A Multi-Product Dynamic Lot-Size Model with Individual and Joint Set-up Costs

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Abstract
This paper considers a multi-product dynamic lot-size problem. In addition to a separate set-up cost for each product ordered, a joint set-up cost is incurred when one or more products are ordered. We present a dynamic programming formulation for finding the optimal ordering policy that calls for a smaller state space than that proposed by Zangwill. As a convenient substitute, we also introduce a very simple heuristic procedure and two of its variants. For the two-product problem we report computational experience for evaluating the performance of these procedures.

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