Joint production and shipment lot sizing for a delivery price-based production facility

Shine Der Lee, Yen Chen Fu

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)


A joint economic production quantity (EPQ) and delivery quantity model for a production system is investigated in this paper. More specifically, an EPQ policy is implemented in the production system, while a smaller shipping quantity is periodically dispatched to the customer. The production system is also responsible for the shipment cost, i.e. a delivery price-based procurement from the customer. The considered cost includes setup cost to launch the batch production, inventory carrying cost, and transportation cost, where the transportation cost is a function of the delivery quantity. A per unit time cost model is developed and analysed to determine the optimal production and delivery quantities. Under some mild conditions, it can be shown that the joint cost function is convex with respect to the production quantity; and the number of delivery is an integer in each replenishment cycle. Computational study has demonstrated the significant impact of the joint decision model on the operating cost. In particular, the reduction in total cost can be more than 15% when inventory carrying costs, and/or transportation costs, are high.

Original languageEnglish
Pages (from-to)6152-6162
Number of pages11
JournalInternational Journal of Production Research
Issue number20
Publication statusPublished - 2013 Oct 15

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering


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