OR Practice-Determining Lot Sizes and Resource Requirements: A Review

Inventory planning can become extremely complicated in situations with nontrivial setup times and/or costs. The pervasiveness of this type of problem in actual practice, combined with its computational complexity, has long attracted researchers' attention. Although the most general model formulations still defy optimization when applied to realistically sized problems, many recent contributions are both innovative and promising. This article concentrates on the lot-sizing and capacity dimensions of production planning. We review selected contributions in four major categories, drawing from both practitioner-and research-based literature. We assess the strengths and weaknesses of these contributions, and suggest promising research avenues. We conclude that capacity limitations, as well as other realities of plant environments, such as scrap, demand uncertainties or inaccurate data, are the Achilles heel of lot-sizing research. Directing attention to these complex environments is a challenge that offers great rewards for actual implementation.