In this paper we present a method to obtain the solution of an integrated production/delivery quantity model when production rate goes to infinity. These so-called two-stage lot-size models determine delivery quantity and number of delivery from the perspective of the supply chain with the objective of minimizing total operating costs. The total cost includes setup cost, ordering cost, inventory carrying cost, and transportation cost that is a fitted function of delivery quantity, using actual shipping rate data. The focus of this study is on assessing the deviation of these policies from the optimal solution. We expose some of them and illustrate the use of the method with numerical examples.

Keywords: supply chain, transportation cost, two-stage, lot-size, equal-size-shipment

Chun-Wu Yeh is currently an assistant professor in Information Management, Kun Shan University, Taiwan. He earned B.S. in Institute of Manufacturing Information and Systems from National Cheng Kung University, and PhD in Industrial and Information Management from National Cheng Kung University, Taiwan. His research interests include supply chain and operations management, software engineering, data mining, and small sample learning. Related papers have appeared in such professional journals as Computers & Industrial Engineering, International Journal of Production Research, International Journal of Advanced Manufacturing Technology, Mathematical Problems in Engineering, Engineering Applications of Artificial Intelligence, Expert Systems, Expert Systems with Applications and others.

Yen-Chen Fu earned her Ph.D. degree from Industrial and Information Management, National Cheng Kung University Taiwan. Her research interests include inventory control and supply chain management. Related papers have appeared in such professional journals as Naval Research Logistics, Transactions Research, Applied Mathematical Modelling, and Mathematical Problems in Engineering.