Lot sizing versus batching in the production and distribution planning of perishable goods

Joint production and distribution planning at the operational level has received a great deal of attention from researchers. In most industries these processes are decoupled by means of final goods inventory that allow for a separated planning of these tasks. However, for example, in the catering industry, an integrated planning framework tends to be more favorable due to the perishable nature of the products that forces a make-to-order production strategy. So far this planning problem has only been addressed by allowing the batching of orders. The main contribution of this paper is to extend this approach and prove the importance of lot sizing for make-to-order systems when perishability is explicitly considered. The value of considering lot sizing versus batching is further investigated per type of production scenario. Overall, results indicate that lot sizing is able to deliver better solutions than batching. On average, for the improved instances, the cost savings ascend to 6.5% when using lot sizing. The added flexibility of lot sizing allows for a reduction on production setup costs and both fixed and variable distribution costs. The savings derived from lot sizing are enhanced by customer oriented time windows and production systems with non-triangular setups. (C) 2013 Elsevier B.V. All rights reserved.