The impact of capacity on lot sizing decisions

This paper reports on the results of research intended to examine the impact of capacity level on the performances of different lot sizing rules in a multiproduct, multistage system using Material Requirements Planning. The results are measured on the basis of frequency of stockouts, number of setups and average dollar inventory level, and total inventory cost. Although the impact of capacity level on the relative performance of different lot sizing rules is not as significant as originally suspected, it is an important factor along with other factors to be considered in choosing an appropriate decision rule. Our findings also brought out several points which do not confirm many previous studies.