ECONOMIC PRODUCTION QUANTITY MODEL CONSIDERING THE LOT SIZE OF DELIVERY IN THE MAKE TO ORDER SYSTEM

Abstract

Production and delivery strategies need to be considered in the producer-buyer supply chain. The mathematical model that has been adapted to the conditions of the company can be used as a consideration in making decisions. This final project discusses the Economic Production Quantity model (EPQ) that implements a maketo-order production system and considers transportation costs. The integrated EPQ model was developed to minimize the total cost of inventory for producer and buyer. Based on this model, the optimal amount of production and delivery can be determined. The heuristic procedure is applied to obtain an integer solution from the model under study. The simulation results show a savings of 19,5% when applying the heuristic procedures to find solutions from this model. Keywords: Economic Production Quantity model, make-to-order system, joint production, periodic delivery, Mixed Integer Nonlinear Programming