Common cycle scheduling in a multistage production process

Abstract

The conventional approach to the common cycle problem assumes a single production stage and takes into account only the setup costs and the carrying costs of finished inventories. This approach is limited to a single stage production process because the carrying costs of in-process inventories which are inherent in any multistage production process are not included.

This paper presents a multiproduct, multistage common cycle model. It differs from the conventional common cycle model in that it includes hidden in-process inventory carrying costs. The optimal common cycle is determined to minimize the setup, in-process and finished inventories carrying costs for a predetermined production sequence. A numerical example is then presented to compare the cost savings in using the revised model with the use of the conventional model.

The revised model provides insights of in-process inventory measurement and improves the current management thought and practice in common cycle decision making for a multistage production process. The ideas and findings of this paper are of managerial significance. The users of the revised model will be able to correctly calculate the optimal common cycle which results in cost savings due to greatly reduced lot sizes. The smaller lot sizes affect investment in inventories, production lead times, product quality and many other related operations management issues.