Two-level uncapacitated lot-sizing problem considering the financing cost of working capital requirement
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RESEARCH ARTICLE
Yuan BIAN, David LEMOINE, Thomas G. YEUNG, Nathalie BOSTEL
Two-level uncapacitated lot-sizing problem considering the financing cost of working capital requirement
© Higher Education Press 2020
Abstract During financial crisis, companies constantly need free cash flows to efficiently react to any uncertainty, thus ensuring solvency. Working capital requirement (WCR) has been recognized as a key factor for releasing tied up cash in companies. However, in literatures related to lot-sizing problem, WCR has only been studied in the single-level supply chain context. In this paper, we initially adopt WCR model for a multi-level case. A two-level (supplier–customer) model is established on the basis of the classic multi-level lot-sizing model integrated with WCR financing cost. To tackle this problem, we propose sequential and centralized approaches to solve the twolevel case with a serial chain structure. The ZIO (Zero Inventory Ordering) property is further confirmed valid in both cases. This property allows us to establish a dynamic programming-based algorithm, which solves the problem in O(T4). Finally, numerical tests show differences in optimal plans obtained by both approaches and the influence of varying delays in payment on the WCR of both actors. Keywords two-level ULS problem, lot-sizing, working capital requirement, ZIO property, infinite production capacity
Received November 6, 2018; accepted August 7, 2019
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Yuan BIAN ( ) School of Economics and Management, University of Chinese Academy of Sciences, Beijing 100049, China E-mail: [email protected] David LEMOINE, Thomas G. YEUNG LS2N UMR CNRS 6004, IMT Atlantique, Nantes 44300, France Nathalie BOSTEL LS2N UMR CNRS 6004, University of Nantes, Saint-Nazaire 44606, France
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Introduction
Tactical production planning is one of the major decision processes in production management as emphasized in the MRP II (Manufacturing Resource Planning) methodology. Tactical planning aims to fulfill customers’ demands by determining the quantities to be manufactured while minimizing logistic costs, such as holding, setup, and production costs. To tackle this problem, several mathematical models have been designed; among them, “lotsizing” models have been recognized for their efficiency (Drexl and Kimms, 1997). In recent years, literatures of supply chain management, which followed the original work of Babich and Sobel (2004), have become aware that financial and operational problems are imbricated. In addition, simultaneously optimizing the two dimensions can improve companies’ global performance in a more efficient way (Peng and Zhou, 2019). Extending the tactical plan process by considering financial aspects and optimizing logistic costs and their financial impacts seems promising. This process can reduce bankruptcy risk by finding the trade-off between the logistic and financial costs generated by operation decisions made at the tactical supply chain management. Therefore, this study proposes to deal with tactical planning at a multi-level supply chain with a s
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