Multi-item dynamic lot-sizing with delayed transportation policy

We optimize ordering and inbound shipment decisions for a manufacturer that sources multiple items from a single supplier. The objective is to satisfy the requirements in the production plan with minimum transportation and inventory holding costs over a multi-period planning horizon. Transportation costs are charged to the manufacturer on a per truck shipment basis. We investigate the option of delaying a less-than-full truckload shipment to the next period, by utilizing the safety stocks as needed. We analyze the impact of delaying shipments on both cost and service levels in stochastic environments through experiments with data from a bus manufacturer. The results indicate that the proposed policy reduces both holding and transportation costs without creating much stock-out risk. (C) 2011 Elsevier B.V. All rights reserved.