Solving a multi-level capacitated lot sizing problem with multi-period setup carry-over via a fix-and-optimize heuristic

This paper presents a new algorithm for the dynamic Multi-Level Capacitated Lot Sizing Problem with Setup Carry-Overs (MLCLSP-L). The MLCLSP-L is a big-bucket model that allows the production of any number of products within a period, but it incorporates partial sequencing of the production orders in the sense that the first and the last product produced in a period are determined by the model. We solve a model which is applicable to general bill-of-material structures and which includes minimum lead times of one period and multi-period setup carry-overs. Our algorithm solves a series of mixed-integer linear programs in an iterative so-called Fix-and-Optimize approach. In each instance of these mixed-integer linear programs a large number of binary setup variables is fixed whereas only a small subset of these variables is optimized, together with the complete set of the inventory and lot size variables. A numerical study shows that the algorithm provides high-quality results and that the computational effort is moderate.