Economic batch quantity in a multi-stage production system

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Abstract
A mathematical model has been developed in this paper for determining the total annual variable cost for a product which requires processing on a number of production stages. The demand for the product is assumed uniform over time and it is manufactured in equal lot sizes. In order to minimize the manufacturing cycle time of o production lot, the movement of the items between production stages is in sub-batches of equal sizes, As a result of manufacturing a production lot in sub-batches, the following additional costs are incurred: (1) additional cost of stock holding for process inventory; (2) cost of transporting sub-batches; (3) cost of multiple set-ups. A simple method is then adopted for minimizing the total annual variable cost of the multistage production system. An example has been solved to illustrate the method.