Less Nervous MRP Systems: A Dynamic Economic Lot-Sizing Approach

The Wagner-Whitin dynamic economic lot-sizing technique has not been widely applied to real-world production scheduling problems. A frequently quoted reason is the extreme sensitivity of the solution to changes in the estimates of future values of the problem's parameters, especially future demand. This "nervousness" has been of great concern to users of MRP (Material Requirements Planning) systems. A solution procedure which incorporates the cost of changing the current production schedule alleviates this nervousness by considering its economic effect. Thus updated parameter forecasts can be effectively used, and the schedule will be changed only when the joint consideration of setup, inventory holding, and schedule change costs indicates that it is economically beneficial to do so.