Economic production quantity for supply chain system with volume flexibility

A production-delivery system with volume flexibility in a single-stage supply chain is considered in this research. In this system, raw materials and/or component parts are procured from suppliers and processed into finished products, which are delivered to customers periodically at a fixed quantity with a fixed interval of time. We develop a decision-making model for optimal production rate selection. It takes into account not only raw materials´ and finished goods´ inventory cost but production cost as well. In this model, production rate is perceived as a decision variable and unit production cost becomes a function of production rate. A pragmatic computational approach is presented to solve the proposed model for special unit production cost functions. Finally, we conduct a numerical study to illustrate the solution.