Multilevel Lot-Sizing with Inventory Bounds

We consider a single-item multilevel lot-sizing problem with a serial structure where one of the levels has an inventory capacity (the bottleneck level). We propose a novel dynamic programming algorithm combining Zangwill’s approach for the uncapacitated problem and the basis-path approach for the production capacitated problem. Under reasonable assumptions on the cost parameters the time complexity of the algorithm is [Formula: see text] with L the number of levels in the supply chain and T the length of the planning horizon. Computational tests show that our algorithm is significantly faster than the commercial solver Cplex applied to a standard formulation and can solve reasonably sized instances up to 48 periods and 12 levels in a few minutes. History: Accepted by Andrea Lodi, Area Editor for Design & Analysis of Algorithms–Discrete. Funding: This work was supported by the National Research Foundation of Korea (NRF) funded by the Ministry of Education [Grant 2014R1A1A2058513].