Extensions of the Planning Horizon Theorem in the Dynamic Lot Size Model

This paper considers an N period production planning problem in which a sequence of known demands d₁, d₂,..., d_N must be satisfied. The cost of production in period t consists of a setup cost K_t plus a marginal cost per unit c_t. The cost of carrying a unit of inventory into period t is h_{t - 1}. An optimal policy is a production plan that satisfies demand at minimum cost. The main results of the paper are a theorem that decreases the computational effort required to find optimal policies and a theorem that establishes the existence of planning horizons. The results of these two theorems are combined in a forward algorithm for the efficient solution of the problem.