The Capacitated Lot-Sizing Problem with Linked Lot Sizes

Author(s): Christopher Suerie and Hartmut Stadtler

Source: Management Science, Vol. 49, No. 8 (Aug., 2003), pp. 1039-1054
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 The Lot-SizingProblem
Capacitated
with Linked Lot Sizes

Christopher Suerie * Hartmut Stadtler

TechnischeUniversiti't Darmstadt, Institut fiir Betriebswirtschaftslehre,
FachgebietProduktion& Supply Chain Management, Hochschulstraj3e1,
D-64289 Darmstadt, Germany
suerie@bwl.tu-darmstadt.de* stadtler@bwl.tu-darmstadt.de

n this paper a new mixed integer programming (MIP) model formulation and its incorpo-
ration into a time-oriented decomposition heuristic for the capacitated lot-sizing problem
with linked lot sizes (CLSPL) is proposed. The solution approach is based on an extended
model formulation and valid inequalities to yield a tight formulation. Extensive computa-
tional tests prove the capability of this approach and show a superior solution quality with
respect to other solution algorithms published so far.
(Lot-Sizing; MIP; Valid Inequalities;CLSPL)

1. Introduction
Depending on the characteristics of the production
process and the planning detail required, different
types of lot-sizing models are commonly used in prac-
tice. The main difference is between big-bucket and
small-bucket models. In big-bucket models a bucket
size is selected, such that several products requir-
ing different setup states can be produced on each
resource in each bucket (period). This yields a model
formulation, which charges a setup cost and/or time
in every period a specific item is produced. As the
bucket size is usually much larger than setup times
(when present), the corresponding error due to the
nonpreservation of the setup state between succes-
sive buckets is usually small and negligible. The
standard problem in this context is the capacitated
lot-sizing problem (CLSP), for which different mixed-
integer model formulations (Eppen and Martin 1987,
Stadtler 1996) and various solution algorithms (e.g.,
Trigeiro et al. 1989, Tempelmeier and Derstroff 1996)
are well known.
In contrast, small-bucket models usually allow at
most one setup activity per period. As the sequence of
products is clearly defined in this situation, they not
only solve the lot-sizing problem, but also the schedul-
ing problem. Different models are distinguished with
respect to the number of items producible on each
resource per period (one or two) and the extent of
a bucket's capacity utilization (all-or-nothing or par-
tial). The discrete lot sizing and scheduling problem
(DLSP) allows at most one product per period, and
production must be for the full period or not at all (all-
or-nothing) (Fleischmann 1990). The continuous setup
lot-sizing problem (CSLP) allows at most one product
per period, but does not limit the production amount
per period (Karmarkar and Schrage 1985 and Salomon
1991), whereas the proportional lot sizing and schedul-
ing problem (PLSP) allows up to two products per
period which share available capacity, with no restric-
tions on the extent to which available capacity has to
be used up (Drexl and Haase 1995).
In practice, to obtain more accurate plans, there is
a trend towards smaller bucket sizes. This holds true
especially in the multilevel case where large planned
lead times of orders are a drawback inherent to big-
bucket models. On the other hand, in small-bucket
problems the planning horizon has to be divided into
many more buckets to yield a solution comparable to

0025-1909/03/4908/ 1039$05.00 MANAGEMENT SCIENCE ( 2003 INFORMS

1526-5501electronicISSN Vol. 49, No. 8, August 2003, pp. 1039-1054
 SUERIE AND STADTLER
The CapacitatedLot-Sizing Problem
that of a big-bucket model. This increases the problem
complexity in terms of the number of constraints and
variables necessary in a MIP model formulation.
Therefore, a new model combining characteristics
of both big- and small-bucket models received atten-
tion in the lot-sizing literature-namely, the capaci-
tated lot-sizing problem with linked lot sizes (CLSPL)
(e.g., Haase 1994; Gopalakrishnan et al. 1995, 2001;
Sox and Gao 1999). The CLSPL is a big-bucket model,
but it permits us to carry over one setup state from
one period to the next (see Figure 1). This paper
presents a new MIP model formulation of the CLSPL,
proposes some valid inequalities for this model for-
mulation, and suggests a time-oriented decomposi-
tion heuristic to solve problems with a large number
(e.g., 30) of periods.
The outline of this paper is as follows. Section 2
offers a literature review with respect to research on
the CLSPL. In ?3 the characteristics of the CLSPL
are discussed and a MIP model formulation is given.
Section 4 extends this model formulation and pro-
poses valid inequalities. Two solution approaches
(MIP and a time-oriented decomposition heuristic) are
presented in ?5, followed by computational results in
?6. Finally, the paper ends with some conclusions and
remarks (?7).
1
Figure Characterization
ofModels
Big-bucket(e.g., CLSP)
Long
period
J products/period LL
1 2
Small-bucket(e.g., PLSP)
Short period
?2 products/period
1 2
CLSPL
Longperiod
..
J products/period
Linkedlot-sizes
1 2
I
• ~
Capacityconsumption
1040
2. Literature Review
Various authors have treated the CLSPL in similar
configurations. The main characteristics of the CLSPL
inherent to all approaches are:
* Several products requiring a unique setup state
can be produced on each resource in each period (big-
bucket model).
* At most one setup state can be carried over from
one period to the next. Thus, two lots of adjacent peri-
ods are linked, requiring no new setup activity in the
second period.
Motivated by a practical production planning prob-
lem, Dillenberger et al. (1993) were the first to tackle
the CLSPL. They presented a MIP model formula-
tion and a so-called fix-and-relax heuristic to solve it.
This heuristic approach basically consists of a branch-
and-bound scheme where the order of binary vari-
ables to branch on is given by the period sequence
(forward; 1, ... , T).
Haase (1994) has given the name CLSPL to this
model. He provides a MIP model formulation and
applies a stochastic heuristic called Backward Add
CLSPL (BACLSPL) to solve it. The heuristic moves
backwards from the last to the first period and adds
setup and lot-sizing decisions in each period based
on a randomized regret measure. Later, Haase (1998)
changed his model formulation and heuristic, such
time
3 4 5
time
3 4 5 6 7 8 9 10
" -- . -- .
time
3 4 5
of lotsof differentproducts
SCIENCE/Vol. 49, No. 8, August 2003
MANAGEMENT
 SUERIE AND STADTLER
The CapacitatedLot-Sizing Problem
that a setup state can no longer be preserved over
more than one consecutive bucket boundary. He did
so because he observed in his test data that both prob-
lems yield the same or similar solutions most of the
time, but the newer model formulation is much easier.
Haase (1998) compares his heuristic BACLSPL with a
two-step procedure which first solves the CLSP and
afterwards links two lots of the same product in adja-
cent periods simply by a greedy heuristic. He is able
to conclude from his extensive computational tests
that solutions obtained by BACLSPL are better than
solutions of this two-step procedure (i.e., solutions
obtained by a model taking the possibility of linking
into account are better than solutions obtained by a
standard CLSP approach and adding links in a second
step).
Gopalakrishnan et al. (1995) introduce product
independent setup times in the model formulation,
which become product dependent in Gopalakrishnan
(2000). Their MIP model formulation is characterized
by an extensive use of binary variables in comparison
to the model formulations by Dillenberger et al. (1993)
and Haase (1994). The decision problem, motivated
by a real-world case, is then solved by a standard MIP
solver (LINDO).
Sox and Gao (1999) again consider the CLSPL with-
out setup times. They propose a new model formu-
lation based on a shortest-route representation of the
problem yielding tight LP bounds. Their model for-
mulation is sufficient to solve smaller test instances
(J = 8 products, T = 8 periods, M = 1 resource) to
optimality within seconds, whereas they propose a
Lagrangean decomposition heuristic to solve larger
problems. As already stated by Haase (1998), they
also observe that restricting the preservation of setup
states, such that one setup state cannot be linked on
both bucket boundaries, is advantageous with respect
to the solution time of their algorithm. However,
they derive this observation from a rather small test
set (five instances) citing a maximum deviation from
optimality of 2.19%.
Recently, Gopalakrishnan et al. (2001) take up
the CLSPL, now called capacitated lot-sizing prob-
lem with setup carryover (CLSP-SC). They present
a tabu-search heuristic to solve it and offer some
computational results on a comprehensive test set
MANAGEMENT
SCIENCE/Vol. 49, No. 8, August 2003
(681 instances) to prove the solution quality of their
algorithm. Their model and test data again include
setup times.
3. Model Formulation
The model of the CLSPL under consideration here is
based on the following assumptions:
* The planning horizon T is fixed and divided into
time buckets (1,..., T).
* Resource consumption to produce a product j on
a specific resource m is fixed, and there exists a unique
assignment of products to resources.
This assumption is in line with Tempelmeier and
Derstroff (1996), who argue that lot-size decisions in
a finite capacity model have to be based on "opera-
tions" while the term "item" or "product" are often
used for an aggregate of several operations. Still, we
will use the latter two terms to ease understanding.
The index m for resources is introduced here to
anticipate the multilevel formulation in ?3.4. For
single-resource problems (??3.1-3.3), the index can be
abandoned (M = 1).
* Setups incur setup costs and consume setup time,
thereby reducing capacity in periods in which setups
occur. Setup costs, as well as setup times, are sequence
independent.
* At most one setup state can be carried over on
each resource from one period to the next, such that
no setup activity is necessary in the second period.
* Single-item production is possible (i.e., the con-
servation of one setup state for the same product over
two consecutive bucket boundaries).
* A setup state is not lost if there is no production
on the resource within a bucket.
Therefore, the CLSPL contains a property of small-
buckets models, which is the preservation of setup
states over bucket boundaries, while retaining its big-
bucket character.
To derive a mathematical model formulation, we
start with the standard model CLSP (e.g., Trigeiro
et al. 1989). The proposed model formulation will be
called "Inventory & Lotsize" (I&L)-representation due
to the variables used.
1041
 SUERIE AND STADTLER
TheCapacitated
Lot-SizingProblem

3.1. Starting Base: CLSP The objective function (1) aims at the minimiza-
CLSP model formulation (I&L representation): tion of inventory holding and setup costs. Produc-
tion costs are assumed to be constant over time and
J T-1 IT
sc1 therefore irrelevant-in this decision situation. Con-
MinE• + . (1)
hj It, yE Yj straints (2) are inventory balance constraints, and
j=1 t=1 j=1 t=l
constraints (3) ensure that capacity required for pro-
Ijt,-l+ Xj=Ij+Pjt Vj= 1,... J, duction plus capacity used up by setup operations
t= 1, ..., T, (2) do not exceed available capacity. Setup constraints (4)
* +1 - force the binary setup variable Yt to "1" in case of
E X1t Y;jt C,,,t a positive production quantity X1t. Finally, variables
jR?,,a,, jR,,, st.
are restricted to be nonnegative or binary, respectively
Vm= 1,... , M, t=1,..., T, (3)
(5)-(7).
<O it Vj = 1,..., J, t= 1,... , T, (4)
Xjt Bjt =
0 (Ijo= = j 1,... , J, 3.2. Simple Plant Location (SPL) Representation
Ij IjT 0)
>_ t = 1, To obtain a tight model formulation, a standard refor-
,T-1, (5)
.... mulation, called simple plant location (SPL) represen-
Xjt >
0 Vj = 1 ...., J, t = 1, .... T, (6) tation, will be used (Rosling 1986, Stadtler 1996). In
this model formulation the production quantity vari-
YitE {0; 1} Vj= 1,...f, J, t= 1 , T. (7)
.... ables Xjt are replaced by variables Zt,, according to
Indices and index sets:
T

j = Products or items, j = 1, ..., J; := ED0. Zrs Vj = 1, ... , J, t = 1,..., T. (8)

in = Resources (e.g. personnel, machines, production Xj, s=t

lines), m -=1,.../ M;
t = Periods, t = 1,..., T; D't denotes net demand for product j in period t,
whereas variables Z,,t can be interpreted as the por-
R,,, = Set of products j produced on resource m. tion of demand of product j in period t fulfilled by
Data: production in period s (see Stadtler 1996 for a proce-
dure to calculate net demands D't). New constraints
a,,,j= Capacity needed on resource m to produce one
unit of item j; (9) have to be added to ensure that each period's
= demand is met.
Bjt Large number, not limiting feasible lot sizes of
This leads to the following CLSP model formula-
product j in period t;
= tion (SPL representation) with (la)-(7a) correspond-
C,,, Available capacity of resource m in period t;
hi =Holding cost for one unit of product j per ing to (1) to (7) of the first model formulation:
period; I T-1T I T
t
Pit Primary, gross demand for item j in period
= Min E hj (t- s). +
Zy scj.-Yj; (la)
(with P)T including final inventory, if given for j=l s=l D't.Z1t
t=s j=1 t=l
the planning horizon T); T
sc1 = Setup cost for product j;
E YaI] E C,,,t
= Setup time for product j. jER,,, s=t j R,,, stj. Yj, <
D•'Zjts+
sty
Variables: Vm = 1,... , M, t = 1,... , T, (3a)
= Inventory of item j at the end of period t; = 1
Ij = Production amount of item j in period t (lot Z.ts < Vj ... , J, t= 1,..., T,
Xit Y.t s = t,... , T, (4a)
size);
Binary setup variable (=1, if a setup for item j
Yjt= Vj =1,..., J, t=1,..., T, D > 0, (9)
is performed in period t, 0 otherwise). EZs=1
s=-

1042 MANAGEMENTSCIENCE/Vol. 49, No. 8, August 2003

 SUERIEAND STADTLER
The CapacitatedLot-Sizing Problem

Zjts> 0 Vj= T, Wt E {0; 1} (Wjl :=0) Vj=1,...,J,

,1/....,fJ,t=1,....,
s = t,..., T, (6a) t 1 ... ,T. (15)
Constraints (10) ensure that at most one setup state
YjtE {0; 1} Vj = 1,..., J, T. (7a)
t-= 1,..., can be preserved from one period to the next on each
In the following we will stick (w.l.o.g.) to production resource. Constraints (11) guarantee that a set up can
quantity variables Xt when possible for ease of pre- be carried over to period t only if either item j was
sentation. The SPL representation differs only by sub- set up in period t- 1 (that is = 1) or the setup
stituting Xt according to (8). state is already carried over from Yt,_-
period t- 2 to t- 1
(that is = A
1). setup state can only be preserved
3.3. Linked Lot Sizes over two Wjt_
consecutive bucket boundaries, if Q,, = 1
To include the linkage property into the CLSP model (12), which is only possible if there is no setup in this
formulation, two new sets of variables have to be period (13).
introduced, four sets of constraints have to be added, The setup constraints ((4b) replacing (4a)) are mod-
and the setup constraints (4a) have to be modified. ified such that production of product j in period t can
The first variables to be added are binary variables occur, if either the product is set up in period t (that
is Yjt= 1) or the setup state is preserved from period
Wjt (linkage variables) indicating whether a setup
state for product j is carried over from period t - I t - 1 (that is, Wit= 1). Variables are restricted to be
to period t (=1) or not (=0), implying that product j nonnegative or binary, respectively ((14) and (15)).
has to be produced first in period t. Variables Q,,,t It is important not to formulate (10) as an equality,
indicate that production on resource imin period t is although there has to be one setup state at each bucket
limited to at most one product for which no setup boundary and setups cannot be lost. A justification
has to be performed because the setup state for this for this is given in Appendix A.
specific product is linked to the preceding and follow- Finally, the CLSPL can be stated with objective
function (la) and constraints (3a), (4b), (6a)-(7a),
ing period (=1), or not (=0). Although variables Q,,,t
take only values 10; 1} they do not have to be defined (9)-(15). This results in a model with at most (2. J.
T - J) binary variables, (J - T ((T + 1)/2) + M - (T - 2))
binary explicitly.
To ensure that the variables take on the expected continuous variables, and T. ((T + 1)/2 +4) + 2. M-
T - 2 J - M) constraints. (J.
values the following constraints have to be added to
the model formulation.
3.4. Multilevel Product Structure
CLSPL (linked lotsizes), additional constraints:
As multilevel product structures often appear in prac-
tical production-planning problems, such an exten-
SWit 1 Vm = 1,..., M, t =2,..., T, (10)
jER,,M
sion to the base model is proposed here. To include
the multilevel case, inventory balance constraints
+W, Vj=l,...,Jt=2,...,T, (11) have to be added to take into account dependent
Wjt-_Y<jt_ < demand:
Wt+1?+W?t 1+ Q,,11t m= 1,..., M,
= lit + k Xkt+
jE RR1, 1,... I,T-1, 1 (12) ,_1 JXjt P, +
t-= kESi
1 Vm =1,... , M,, je Rm, vj -1,...,IJ t-1
Yjt+Qt -< t 1 (13) .... T. (16)
- .... , T, Indices and index sets:
Z <ts Yt+ jt Vj= 1, ... , J, t = 1, ... , T, Si = Set of direct successors of item j.
_ s =t,..., T, (4b) Data:
drk= Units of items j necessary to produce one unit of
>0 := 0; QmT:= 0)
Qnt the direct successor item k;
(Qml
Vm=1,... ,M, t=1,1... ,T-1, (14) I= Lead time offset (in the following assumed "0").

SCIENCE/Vol.49, No. 8, August 2003

MANAGEMENT 1043
 SUERIEAND STADTLER
TheCapacitated
Lot-SizingProblem

Additionally, an assignment of products to resour-
ces seems necessary, which was already introduced in
the base model formulation (??3.1-3.3) by means of
index m.
4. Extended Model Formulation
and Valid Inequalities
Now that a basic model formulation for CLSPL has
been described, we will try to strengthen it. Strength-
ening in this context means to find a MIP model for-
mulation that yields tighter LP bounds. The first step
will be to derive an extended model formulation by
adding variables; later, three groups of valid inequal-
ities will be presented.
two of them. Constraints (19), now including vari-
ables QQjt, guarantee that a setup can be carried over
in period t only if either item j was set up in period
t - 1 (that is, = 1) or the setup state is already
Yjt-
carried over from period t- 2 to t - 1, which implies
single-item production of product j in period t - 1
(that is, QQjt-1 = 1). They replace constraints (11):
_ , TJ,
<Yjt-1 + QQjt-=...
Wit
t =2,...,T. (19)
Finally, constraints (20) have to be added to the model
formulation, restricting the range of values for vari-
ables QQjt and, of course, nonnegativity constraints
(21):

QQjt < Wjs Vj = 1,..., J, t = 2,..., T -1,

4.1. Extended Model Formulation
It is possible to considerably strengthen the model for- s = t,..., t+1. (20)
mulation by making resource-dependent single-item
QQjt
> 0 (QQl = 0, =
QQjr 0) j= 1,..., J,
indicator variables Q,,t product-dependent variables
t = 1, T. (21)
QQ1t.This not only allows us to replace variables Q,,7t .....
in (13), but these new variables can also be used to
A revised version of constraints (12) is not neces-
strengthen other constraints and even to abandon one
sary, as these constraints (22) are now dominated by
type of constraints (12). Although they do not need (18) and (19):
to be declared binary explicitly, variables QQt take
the value "1" if item j is produced solely in period t
W, + wjt l+QQt Vj=1,...,TJ ,
and the setup state is linked to the previous and the t= 1,... T-1. (22)
following period, such that Wit = Wjt+l = 1, and "0"
otherwise. Constraint set (18)-(21), which is formed primarily by
This leads to constraints (17) replacing (13): the introduction of a new variable and its incor-
to the model QQt,
formulation, yields a stronger
poration
Yt +I QQkt <l Vm=l,..., M, jE R,,, formulation than the standard formulation presented
k (17)R, in ?3.3 (constraints (11)-(14)). Note that for some com-
T.
t=1,... , T. (17) mercial MIP solvers the explicit definition of (global)
variables Q,,t may be advantageous. At the expense
The right-hand side becomes stronger by subtracting of some additional equations and (global) variables,
Wit- QQjt, resulting in (18): one is able to substitute the term QQjtin some
other constraints, resulting in fewer nonzero coeffi-
-,jR,,
+ E QQkt < 1
YWt Wjt+ m = I,..., M, ji R,, , cients and a faster solution process.
kER,,
koj
t=1, T. (18) 4.2. Valid Inequalities
....,
It is easily seen that this constraint is valid: There 4.2.1. Preprocessing-Inequalities. A first group
can be either a setup activity for item j in period t of valid inequalities can be obtained by utilizing some
(Y>t= 1), or a link for item j into period t (Wjt = 1), or information contained in the test data. Essentially,
single-item production for any item k $j in period t it further restricts the range of values of the vari-
(one QQkt= 1), none of those three options, but never ables QQjt proposed in ?4.1. As these inequalities are

1044 MANAGEMENTSCIENCE/Vol. 49, No. 8, August 2003

 SUERIE AND STADTLER
TheCapacitated
Lot-SizingProblem

derived solely from the model data, this step is called ables QQj, hold ((23)-(24)):
preprocessing, which was also used by Maes et al. t+U-1
(1991) for the serial MLCLSP. Before a mathematical u-1 Vm= 1,...,M,je
formulation is presented, the idea will be shown by s=-t
QQjs Rm,t=2,...,
means of an example (Table 1). T-U+1,U=1,...,3, if
Net demands for items 1 to 3 of periods 1 to 3 are t-1 t-1

given, such that initial inventory is already absorbed LCms-L 1 Ds- E Stk
s=1 s=1kERm amk' kERm
in the demand figures (Ijo= 0). Taking into considera- I"-1 Dn>0
tion available capacity and that no backlog is allowed, t+U-1
one can compute "cumulative slack capacities," which - amk-D, <0. (23)
are the units of capacity available in or before period t s=t
kERM
k#j
for production of demands due in later periods. In
t+V-1
the example (Table 1) there cannot be single-item
E QQs< V-1 Vm=l ,..., M,t=2,...,
production in period 2: This is because to produce s=t jERm

only one item in period 2 requires a minimum of T-V+1, V=1,...,3, if

40 units of capacity consumption (edemand) being t-1 t-1 t+V-1
shifted to period 1. However, cumulative slack capac- -D• a,j- "s- stj- aj Dlns
s=lSCms s=11.ER,,j,ERv
ity in period 1 is only 30. Regarding period 3, it can s=t jER,,

be observed that single-item production is not pos-

sible for items 1 and 3 because 60 units of demand
+max < 0. (24)
(capacity consumption) would have to be scheduled a,,joD
s=t
jER,,,\
in period 2 at the latest, but there is only a cumulative
slack capacity of 50 units available. For U = 1, in constraints (23) single-item produc-
Generally speaking, the argument is as follows, tion variables are forced to "0" if the associated
QQjt
cumulative slack
with U denoting the length of the interval under capacity condition is fulfilled. The
consideration: If cumulative slack capacity (up to condition calculates the available cumulative slack
period t - 1) is less than the amount that has to be capacity of resource m and subtracts the minimum
preproduced to allow single-item production of just capacity consumption of period t, which has to be
one product in the interval under consideration [t; t + preproduced to enable single-item production of item
U - 1], then at least two products have to be pro- j in period t. Cumulative slack capacity is com-
duced in the interval [t; t + U - 1]. This implies that puted by adding up available capacity up to period
t - 1 (term 1), subtracting capacity consumption by
at least one setup activity has to be performed, which
demands up to period t- 1 (term 2), and subtracting
implies that not all periods of the interval [t; t + minimum required setup times (term 3). The capac-
U-1] can have single-item production. Therefore, the ity consumption of period t that has to be prepro-
following restrictions to the range of values for vari- duced is calculated by term 4 and then subtracted
from cumulative slack capacity to yield the condition.
Different values for U extend this concept to consec-
Table1 Example utive periods of single-item production. As the effect
am, D02 D2 Dj
of these constraints vanishes with increasing values
for U (respectively, V), these constraints are formu-
Itemj = 1 1 20 20 20
lated for U < 3 (V < 3). Constraints (24) are product
Itemj = 2 1 30 40 40
Itemj = 3 1 20 20 20 independent versions of (23).
Available
capacity 100 100 100 4.2.2. Inventory/Setup-Inequalities. The next set
Cumulativeslackcapacity 30 50
of valid inequalities is long known in the context

MANAGEMENTSCIENCE/Vol. 49, No. 8, August 2003 1045

 SUERIE AND STADTLER
Lot-SizingProblem
TheCapacitated

of small-bucket models (Pochet and Wolsey 1995, Constraints (25) and (26) can be formulated with
Wolsey 1998) and will be transferred to CLSPL. The variables Zis, in the presence of the SPL representation
setup state conservation property of CLSPL will be (Wolsey 1989, Van Hoesel et al. 1994):
used here: If Yit = Wit = 0 for a product j in period t, r r

there is no production of j in t, and consequently the t+ E r

s=tSZsr s=t Yjs Vj=1,... , , = ... , T,
whole demand for product j in period t (Pj,) must
reside in initial stock The same reasoning holds t=1,...r.(27)
(Ijt_l).
for the interval of periods t to t + p, if there is no link 4.2.3. Capacity/Single-Item Production-Inequa-
into the starting period of the interval (Wjt= 0) and lities. The last set of valid inequalities combines the
no setup activity throughout the interval (Yjt= capacity constraints with single-item production vari-
= 0). This leads to valid inequalities (25): ables QQjt. The reasoning for inequalities (28) is that
Yjt+p if there is single-item production for any product k
t+p s of the subset of products RS C R,, on resource m in
> EYr Vj = 1, ... ,J, period t, no capacity consumption of products j•RS
Ijt-1 Pjs 1-Witt-
s=t r=t in period t is allowed on resource m:
t=1,..., T-l,p=1,..., T- t. (25)
1
-
(a,,,j Xjt +stj Yjt)
jeR,,,/RS
For the multilevel case, some adaptations are neces-
sary. The left-hand side has to take into account items 2,..., M, RScR,,
that are already further processed and reside in inven- < Vm=
E-QQkt)
tories of some successor items, whereas on the right- Cint" t= 2,..., T -1. (28)
1-•
hand side the primary demand data PF, has to be
Index set:
exploded according to the bill of materials, such that RS= Subset of set of products j produced on resource
overall net demand for all items j for all periods t
m, RScR,,,.
(DIt) results. Constraints (26) represent the multilevel If there is no single-item production, (28) is reduced
case of constraints (25): to a weaker form of the basic capacity constraints (3).
Multilevel lot sizing requires no modifications.
+ E rjk'Ikt- Constraints (28) can be strengthened by adding
I_1 keSS,

t+p s S XQjt - Cmt QQj

0
IRSa,,,j"
jER,,, jER,,/RS "
s=t r=t on the right-hand side, with additional variables XQjt
Vj=1,..., J, t =1,..., T -1, p =1,..., T - t. (26) defined by (30) and (31). Constraints (30) restrict vari-
ables XQjt to the production quantity, whereas (31)
Index set: forces XQjt to "0" if period t is not a single-item pro-
duction period:
SSj = Set of successor items (direct or indirect) of
item j. - + st ,
I (a,,j Xt Yjt)
jER,,,/RS
Data (for procedures to calculate the additional data
we refer to Stadtler 1996): / RS
< (1- kERM, jERm)
Dn = Net demand for item j in period t; Cit" QQkt- namj.,XQjt
of units of items j included in one Vm= 1,..., M, RS C R, t 2,..., T-1. (29)
rjk Total number
=
unit of item k. XQjt < Xjt Vj = 1,..., J, t =2,..., T -1. (30)

1046 MANAGEMENT
SCIENCE/Vol.49, No. 8, August 2003

< min ET
XQjtX~,( ami =m, St
jCI
tPj
\dj = J/. . fJ,
Variables:
XQjt = Production quantity of item j in period t, if
this is a single-item production period.
These new inequalities (29) can be strengthened
even further by aggregation over all products j pro-
ducible on resource m, giving (32). This aggregation is
stronger than each inequality covering only a subset
of products because the term added on the left-hand
side (E;jERs(amj Xjt + stj Yjt)) is always
or equal to the term added on the right-hand side
.XQjt) due to (30).
(E•,Rs am,,
E (amjXjt+ stj . iYt)
jR,tl " solve larger instances, some heuristic approach seems
~ QQjt/ +
\ jR,,,
Cmt'1-
Vm=1,...,M,
The reasoning for (32) is: If there is single-item pro-
duction on resource m in period t, capacity consump-
tion on resource m is restricted to production of XQj,.
On the other hand, if there is no single-item produc-
tion on resource m in period t, (32) simply reduces to
the capacity constraints (3). Again, multilevel lot siz-
ing requires no modifications. Consequently, only (32)
is considered in the model formulations tested.
5. Solution Approaches
Various solution methods (MIP, Lagrangean decom-
position, tabu search) have been proposed for the
CLSPL (see ?2). Here, the CLSPL is tackled by a stan-
dard MIP solver (XPRESS-MP,Release 12).
One variant, called "Cut and Branch" (C&B), adds
all valid inequalities proposed in ?4 to the initial
model formulation and then solves the resulting LP,
before entering the branch and bound process.
A second variant, in the following called "Branch
and Cut" (B&C), is also tested. In this case, the valid
inequalities are not added to the initial model for-
mulation, but stored separately in a cut pool. Only
SCIENCE/Vol. 49, No. 8, August 2003
MANAGEMENT
SUERIEAND STADTLER
TheCapacitated
Lot-SizingProblem
those cuts that are violated during the MIP search are
"QQjt
put into the matrix. Compared to C&B, this approach
yields smaller matrices and faster solution times at
t =
21 T -1 (31) each node at the price of some separation procedure.
Here, no effort was taken to develop specialized sepa-
ration routines for the proposed cuts, but the standard
"model cut" feature of XPRESS-MP was used instead
(Dash Associates 2000).
There are some advantages to these approaches
(Miller et al. 2000). The first one is that the algor-
ithm-in principle-will terminate with an optimal
solution. The second is that it will find a feasible
solution if one exists, which is not guaranteed when
greater than
using a heuristic approach. On the other hand, both
might require immense amounts of memory and time,
but this drawback diminishes somewhat with the
progress in information technology. Nevertheless, to
appropriate.
Therefore, a time-oriented decomposition heuris-
EajXQ5t
jER,,
tic proposed by Stadtler (2003) for the multilevel
t=2,...,T-1. (32) capacitated lot-sizing problem (MLCLSP) will be
adapted to fit CLSPL needs. The algorithm can
be characterized as a time-oriented decomposition
approach. The planning horizon is divided into three
parts: the lot-sizing window and the time intervals
preceding and following the lot-sizing window (see
Figure 2). In successive planning steps, a lot-sizing
window is moved through the planning horizon. Lot-
sizing decisions, in terms of the model formulation
that are those constraints which include binary vari-
ables, are only considered in the lot-sizing window.
In the time interval preceding the lot-sizing window,
setup decisions (binary variables) are fixed. In the
time interval following the lot-sizing window, only
inventory balance constraints and capacity constraints
(without the inclusion of setup times) are included in
the model formulation to anticipate future capacity
bottlenecks. The objective in each planning step is to
minimize setup and inventory holding costs incurred
up to the end of the current lot-sizing window.
The reasoning for this approach is that a tight
model formulation can be used inside the lot-sizing
window, gathering their benefits without accepting
the drawback of an inflated matrix, if such a model
1047
 SUERIEAND STADTLER
The CapacitatedLot-Sizing Problem

2
Figure Internally RollingScheduleswith Lot-Sizing Windows more planning steps will sometimes emerge, result-
(A/4r/( -, 4/1/2, Stadtler 2003) ing in no solution for the complete problem. In real-
periods t =T ity, actual capacity consumption by setups will lie
5
somewhere in between these two extremes. This is
0 00 & why a third variant (STE)is introduced. Here, capacity
1. Planning step:
--0&-0 O losses due to setups are estimated by their mean real-
2. Planning ized in the periods preceding the lot-sizing window
step: &00o
000
plus some safety margin. Furthermore, the planning
3. Planning step: 0 0 00 0
horizon effect can be reduced by the introduction
of bonuses in the objective function. Because the
4. Planning
step:-
0 00 bonus concept has originally been developed for the
single-level uncapacitated case (Stadtler 2000), it only
Legend: approximates the true costs of lot sizing within the
I I Lot-sizingwindow lot-sizing window in an LP relaxation of a capacitated
Intervalof timewithrelaxedintegrality constraints model. Still, bonuses have improved the solution
--------. Intervalof timefollowingthe lot-sizingwindow quality significantly for the CLSP (Stadtler 2003) as
well as for the CLSPL (this paper). Here, bonuses are
Intervalof timeprecedingthe lot-sizingwindow
calculated along the lines of Stadtler (2003) for setup
costs but not for setup times sty. Of course, the
formulation is used for the whole planning hori- scjof
overlap lot-sizing windows also reduces the plan-
zon. The heuristic is controlled by three parameters horizon effect (see Stadtler 2003 for more details
ning
A/T/I( and a time limit. A indicates the length of the regarding the time-oriented decomposition heuristic).
lot-sizing window, whereas (D represents the overlap
(in periods) of two consecutive lot-sizing windows.
Finally, T stands for the number of periods at the 6. Computational Results
end of the lot-sizing window with relaxed integral- In the remainder, some computational results re-
ity constraints. Thus, A > T holds. Within these garding the model formulation and the solution ap-
settings, a so-called >_
planning horizon effect or end proaches proposed will be given. Additionally, some
effect occurs (Fisher et al. 2001): Due to the objec- comparisons to solutions reported in the literature are
tive function, inventories are minimized at the end drawn. All computations are carried out on a PC
of each lot-sizing window; e.g., they will be zero (Windows NT 4.0) with Pentium IV, 1.7 GHz micro-
if no capacity bottleneck is anticipated. Therefore, a processor, and 256 MB RAM. As a MIP solver,
time-between-order cycle is imposed by the choice of XPRESS-MP release 12 with standard settings is used.
the length of the lot-sizing window. To overcome the
planning horizon effect, several options are proposed 6.1. Single-Level Test Instances Taken from
by Stadtler (2003) and will be used here. the Literature
To anticipate future capacity bottlenecks, three A starting point established four test instances by
variants were tested. The first one (STMIN) neglects Thizy and van Wassenhove (1985), which were also
capacity consumption due to setup times in periods used by Haase (1994) and Sox and Gao (1999). These
following the lot-sizing window. The second variant test instances are solved to optimality by the MIP
(STMAx)depicts the worst case, that is, if all items formulation of Sox and Gao (1999) as well as by
will have to be produced every period. In this case, the model formulation proposed here by a stan-
available capacity per period is reduced by the sum dard MIP solver, within seconds. Hence, it is possi-
of setup times of items producible on the specific ble to evaluate the solutions of heuristic BACLSPL
machine (less the smallest setup time). Consequently, of Haase (1994). These deviate from optimal solu-
if capacities are tight, infeasible problems for one or tions by 5.0% on average (TV11-TV14; J = 8 products,

1048 SCIENCE/Vol.49, No. 8, August 2003

MANAGEMENT
 SUERIE AND STADTLER
The CapacitatedLot-Sizing Problem

T = 8 periods, M = 1 resource) on Haase's test * SPL/ext/vi- B&C: the extended formulation and
instances, which differ from the original in the setup all valid inequalities, Branch and Cut approach (??3.2
cost of product 5 due to a typing error. and 4);
As these test instances are rather small, a test set * Sox/Gao: Model formulation proposed by Sox
introduced by Trigeiro et al. (1989) for the CLSP, and Gao (1999) extended to work with setup times
which was also used by Gopalakrishnan et al. (2001) (see Appendix B for details);
* Gopalakrishnan: Model formulation proposed by
for the CLSPL, will be used in the following (named
TTM-test set). The test set is divided into three Gopalakrishnan (2000).
In the columns, the gaps to lower bound (LB)
phases (Phase I-III). No results for Phase I test
instances are reported in the literature, as these test [=(objective function value - LB)/LB] are calculated
based on the following concept: The solution consid-
instances are regularly used for parameter tuning.
ered is the best solution found after 10 seconds. In
Here, they are used to set the parameters for the case no solution was found after 10 seconds (num-
time-oriented decomposition heuristic (i.e., parame-
ber in brackets), the first solution was taken instead
ters of the lot-sizing window). From Phase I problems,
(which was found after maximal 17 seconds). The
we can conclude that the incorporation of bonuses is lower bound (LB) is either the model's own LP relax-
worthwhile, whereas we discard version STMAX.The ation (LBLP), the LP relaxation after automatic cut gen-
Phase II and III problems are clustered into Classes eration by XPRESS-MP (LBXLP), or the LP relaxation
1-9 according to Table 2. after automatic cut generation of model SPL/ext/vi
In Table 3, gaps to different lower bounds are (LBXLP(ext/vi)),which includes all valid inequalities
reported for Class 1 test instances. The rows show defined in ?4.
the different model formulations that have been The MIP model formulations I&L/basis/-, Sox/
tested: Gao, and Gopalakrishnan are intended to be used as
* I&L/basis/-: the initial formulation (??3.1 and a reference. From Table 3 it can be observed that the
3.3); proposed model formulation with valid inequalities
* SPL/ext/-: the extended formulation (??3.2 and not only yields better solutions (Column 4), but also
4.1); better bounds (Columns 2 and 3) than the model for-
* SPL/ext/vi- C&B: the extended formulation and mulations reported in the literature. Solutions of ver-
all valid inequalities, Cut and Branch approach (??3.2 sions SPL/ext/vi are-independent of the approach
and 4); chosen (C&B vs. B&C)-significantly better than solu-
tions of the three reference model formulations (based
on the one-sided Wilcoxon matched-pairs signed rank
Table2 ofTTM-Test
Classification Set test, which will be used throughout this paper at con-
fidence limits of 99%). Moreover, they both provide
PhaseII
significantly better solutions than SPL/ext/-.
Class # Items # Periods # Instances The LP bounds are rather weak if the valid inequal-
1 6 15 116 ities are not included in the model formulation right
2 6 30 5 from the beginning. They are considerably improved
3 12 15 5
4 12 30 5
by the automatic cut generation for I&L/basis/-
and Gopalakrishnan as well as for the B&C version,
5 24 15 5
6 24 30 5 because the valid inequalities can be drawn from
the cutpool here. The best solutions are obtained by
PhaseIII
the B&C approach, which also obtains a first solu-
7 10 20 180 tion faster.
8 20 20 180 It should be added that the model formulation
9 30 20 180
Sox/Gao, which is rather tight, is not as compact as

SCIENCE/Vol. 49, No. 8, August 2003

MANAGEMENT 1049
 SUERIE AND STADTLER
TheCapacitated
Lot-SizingProblem

Table3 ResultsforClass1 TestInstances

Criteria Gapto LB
Avg.time
Modelformulation Base:LBLP Base:LBXLP Base:LBXLP(ext/vi) first sol. [s]
I&L/basis/- 327.00% 25.95% 6.26% 0.11
SPL/ext/- 13.68% 12.41% 3.94% 1.19
C&B
SPL/ext/vi- 3.32% 2.72% 2.72% 2.66
SPL/ext/vi-B&C 12.14% 2.64% 2.62% 2.34
Sox/Gao 7.37%(2) 6.76% (2) 4.10% (2) 5.18
Gopalakrishnan 350.53% 36.71% 14.97% 1.96

this model formulation. Although it requires fewer
constraints (1,308 vs. 2,118), the matrix is blown up
due to the use of variables (3,150 vs. 1,156) and
nonzero coefficients (57,150 vs. 16,071), which slows
down the solution process in each node (in compar-
ison to SPL/ext/vi on Class 1 test instances). Fur-
thermore, in some rare cases their model formulation
will exclude the optimal solution (see Appendix B
for details).
Additionally, to judge the solution quality of the
B&C approach, the MIP solver was given 600 seconds
for each of the 116 Class 1 test instances. In 91 cases
optimality could be proven within this time limit.
Table 4 shows the capabilities of the time-oriented
decomposition heuristic (?5) compared to the MIP
model formulations. For the MIP model formulations,
the solution after 30 seconds is taken for Classes 1-3
and 5, whereas 60 seconds of computational time are
allowed for Classes 4 and 6-9. Whenever no solu-
tion is reached within these time limits (number in
brackets), the first solution is taken instead. As a
lower bound, the LP relaxation after automatic cut
generation of model SPL/ext/vi (LBXLP(ext/vi)), which
includes all valid inequalities defined in ?4, is cho-
sen here and in the remainder-with the exception
of the results of Gopalakrishnan et al. (2001), where
gaps to LB are taken from their paper (Table 5). For
some test instances, to find even a first solution takes
a lot of computational time (>20 minutes). Mean com-
putational effort for Classes 7-9 is 61.2 seconds for
SPL/ext/- (standard deviation 51.0), 145.3 seconds
for the C&B approach (standard deviation 339.7), and
142.9 seconds for the B&C approach (standard devi-
ation 283.8). In contrast, the time-oriented decom-
position heuristic provides excellent solutions in a
very short time, which shows the effectiveness of the
model formulation.
Table 5 compares the proposed approaches to the
tabu-search heuristic of Gopalakrishnan et al. (2001)-
the most recent results reported for the CLSPL.
The B&C approach (SPL/ext/vi- B&C) yields mean
gaps to LB of about 1/10th of those reported there,
but computational efforts are much bigger, espe-
cially in Classes 7 to 9. However, when considering

Table4 Gapsto LBandSolution

TimesforTTM-Test
Sets
Heuristic(6/2/2, B, STMIN)
SPUext/- SPUext/vi-C&B SPL/ext/vi-
B&C
Class [max:30/60s] [max:30/60s] [max:30/60s] Gapto LB 0 time[max:15s]
1 3.27% 2.19% 2.15% 2.53% 5.2
2 5.47% 2.92% 2.89% 2.32% 8.8
3 2.78% 1.11% 1.58% 0.95% 6.2
4 3.14% 0.88% 0.66% 0.72% 11.8
5 1.59% 0.42% 0.46% 0.54% 9.2
6 2.32% (1) 0.22% (2) 0.25% (1) 0.30% 13.2
7 4.20% 2.52% (18) 2.49% (19) 3.14% 9.2
8 3.21% (36) 1.47% (63) 1.43% (75) 2.73% 12.7
9 2.74% (74) 0.99% (76) 1.01% (83) 2.21% 18.0

1050 MANAGEMENT
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 SUERIE AND STADTLER
Lot-SizingProblem
TheCapacitated

Table5 TimesforTTM-Test
Gapsto LBandSolution ofClasses)
Sets(Aggregation
et al. (2001)
Gopalakrishnan
B&C
SPL/ext/vi- Heuristic
(6/2/2,B,STMIN) 550
[PentiumIII, MHz]
0 time 0 time
Classes Gapto LB [max:30/60s] Gapto LB [max:15s] Gapto LB 0 time[s]

1, 2 2.18% 22.0 2.52% 5.3 27.8%

3, 4 1.12% 45.0 0.84% 9.0 13.9% 20.8
5, 6 0.36% (1) 52.4 0.42% 11.2 6.0%
7-9 1.64%(177) 142.9 2.69% 13.3 12.4% 81.7

the time-oriented decomposition heuristic, both the
solution quality as well as the computational efforts
outperform those reported by Gopalakrishnan et al.
(2001).
6.2. Modified Single-Level Test Instances
Considering Classes 7 to 9, the CLSPL does not really
seem to be an appropriate model. What can be gained
if one out of 30 setup states is carried over every
period, especially if the feature to carry over one
setup state over two consecutive bucket boundaries
is never used here? Instead, the CLSPL should be
applied if only a few items require one resource
and/or some of them are long runners, whereas
demand for the other items is rather low. Therefore, a
new data set is generated from Classes 7 to 9. In Class
7, Items 1-4 and 5-8 are aggregated to form two new
items, such that together with the unchanged Items
9 and 10, Class 7a now has four items. In Class 8a,
Items 1-8 and 9-16 are aggregated to form a new
class with six items, whereas in Class 9a, Items 1-10,
11-20, 21-23, and 24-26 are aggregated, resulting in a
total of eight items. The aggregation is defined such
that the sum of demands (setup costs, setup times) is
taken as the demand (setup cost, setup time) of the
new item, whereas the average is taken for production
coefficients and holding-cost coefficients. This setting
could also be the result of some aggregation of items
to product families. In such a case, the model formu-
lation could be streamlined further by restricting the
link option to the long runners, which has not been
done here.
Table 6 shows computational results for the new
test instances. Again, 60 seconds of computational
time are allowed for each test instance. It can be
observed that the option to carry over one setup state
over two consecutive periods is now used frequently.
There are 3.9 single-item production periods on aver-
age for Class 7a in the solutions of SPL/ext/vi- B&C
(Class 8a: 3.7; Class 9a: 2.4). Compared to the origi-
nal data, the newly created test classes are more dif-
ficult to solve with respect to observed gaps to LB.
The B&C approach outperforms the version with-
out valid inequalities significantly for all test classes.
Here again, the time-oriented decomposition heuris-
tic (6/2/2, B, STMIN) shows its strength by providing
even better solutions than the B&C approach in much

Table6 Gapsto LBandSolution TestClasses7a-9a

TimesforNewlyCreated
Heuristic
(6/2/2,B,STMIN) Heuristic
(6/2/2,B, STE)
C&B
SPL/ext/vi- SPUext/vi-B&C 0 time 0 time
SPUext/-
Class [max:60s] [max:60s] [max:60s] Gapto LB [max:15s] Gapto LB [max:15s]
7a 11.3% 9.9% 9.8% 10.5% 6.0 -

8a 12.9%(2) 12.7%(1) 12.6% 6.9 -

13.7%
9a 9.9% (4) 8.7% (4) 8.9% (4) 8.5% 8.3 -
7a (-20) 9.9% 8.8% 8.7% 9.5% 6.0 9.5% 6.1
8a (-32) 11.0% 10.3% 10.2% 10.3% 6.6 10.5% 6.7
9a (-32) 8.0% (1) 7.2% (1) 7.1% (1) 7.1% 7.8 7.6% 8.0

MANAGEMENT SCIENCE/Vol. 49, No. 8, August 2003 1051

 SUERIE AND STADTLER
TheCapacitated
Lot-SizingProblem

Table7 Gapsto LBandSolution

TimesforTestSetB+
Heuristic(6/2/2, B, STMIN) Heuristic(6/2/2, B, STMIN) Heuristic(4/2/2, B, STMIN)

SPL/ext/vi-B&C 0 time 0 time 0 time

Testset [max:600s] Gapto LB [max:60s] Gapto LB [max:180s] Gapto LB [max:60s]
B+ 37.5%(7) 32.2% 53.2 29.6% 139.5 29.1% 38.7

shorter time. Results for version STEare also compet-
itive, but as argued in ?5, sometimes infeasible solu-
tions (Class 7a: 20; Class 8a: 32; Class 9a: 32) occur.
6.3. Multilevel Test Instances
Last, to apply the model formulation in the multilevel
case, test instances from Stadtler (2003) for MLCLSP
are used (called test set B+). The 60 test instances
used here are those with general operations struc-
ture, and all comprise 10 products on 3 resources over
24 periods. Due to the problem size, the gap to LB
of the complete model is rather large (Table 7). The
time limit was set to 600 seconds or the first solution
was taken (number in brackets). The time-oriented
decomposition heuristic is able to close a considerable
part of the gap to LB in less computational time. As
each lot-sizing window contains a more complex MIP
problem than before, it is wise to reduce the size of the
lot-sizing window or allow more computational time.
Still, the time-oriented decomposition heuristic gener-
ates presumably good solutions in reasonable time.
For a subset of 10 arbitrarily chosen test instances,
we computed better bounds by setting the compu-
tational time to 12 hours and changing the stan-
dard search strategy of XPRESS-MP to breadth search.
By applying this lower bound, gaps for the heuris-
tic (4/2/2, B, STMIN) are reduced by approximately
one-quarter (from 31.6% to 22.6%) (Table 8). Further-
more, we have enlarged the time limit to 12 hours
for solving the complete model SPL/ext/vi- B&C by
the standard search strategy of XPRESS-MP.Although
the solution quality has improved considerably (sec-
ond column, Table 8), it does not outperform the
best decomposition heuristic with a time limit of
60 seconds.
7. Conclusions
In this paper, a new model formulation for the
CLSPL has been presented. Extensive computational
tests show that this MIP model formulation yields
tight lower bounds as well as good primal solutions.
Herein, a branch-and-cut approach within a standard
MIP solver has provided the best results.
As long as lot-sizing problems comprise only a
single level with one resource, the proposed model
formulation, together with the time-oriented decom-
position heuristic, has shown excellent solutions on
a standard PC to problems of the size that arise in
industrial practice. Moreover, it has been argued that
the CLSPL should only be applied in the case where
one can expect that a single-item production (and a
corresponding setup state) carryover will occur in an
optimal solution. Otherwise, simpler models might
be more appropriate to solve the underlying decision
problem.
The use of MIP models inside the lot-sizing win-
dows of the time-oriented decomposition heuristic
makes it easy to adjust the solution algorithm (i.e., the
MIP model formulation inside the lot-sizing window),
in case additional constraints apply.
Some future research will be necessary to prove
the solution quality of the proposed approach for

Table8 Gapsto LB(Breadth Timesfora Subsetof10TestInstances

andSolution
Search) ofTestSetB+
Heuristic(6/2/2, B, STMIN) Heuristic(6/2/2, B, STMIN) Heuristic(4/2/2, B, STMIN)

B&C
SPL/ext/vi- 0 time 0 time 0 time
Testset [max:12h] Gapto LB [max:60s] Gapto LB [max:180s] Gapto LB [max:60s]
B+ (10) 25.0% 26.0% 53.8 23.4% 136.8 22.6% 40.3

1052 MANAGEMENTSCIENCE/Vol. 49, No. 8, August 2003

 SUERIEAND STADTLER
Lot-SizingProblem
TheCapacitated

multilevel problems because the gap to lower bounds B

Figure Example
is still relatively large. Moreover, further extensions Data:j=2, m=l1,t-5
of this model, e.g., to allow parallel resources, differ-
ent resource assignments, or setup times over bucket j hj scj amj D"1, D"2 D.3
J3 D 44 D5
SaJ2 j__ J5_.
boundaries, can be the next steps. 1 10 100 1 0 5 1 0 0
2 1 5000 1 10 0 10 10 10
Acknowledgments
The authors thank the two anonymous referees for their valuable Capacity 12 5 9 20 0
suggestions.
Optimal solution: 10114
Appendix A. Justification for Formulating (10) Not
as an Equality t=2 t=3 t-4 t--5
t=l
The example (Figure A) shows a special case that requires all link- X,,
j=l 5 1
age variables to become "0" for one period. As no backlog is
allowed, the optimal solution is the only feasible solution. In the j=2 12 8 20
first two periods, available capacity is used up by setup and pro-
duction of Product 1 (20 + 100 = 120, Period 1) and setup for Prod-
Graph for productj=2 (optimal solution)
uct 2 (80, Period 1), As well as for production of Product 2 (200,
Period 2). As W2,4 has to take value "1" to produce 200 units in
t1 t=2 t-=3 t-4 t=5 t=6
Period 4, W2,3 is forced to "0." This is due to constraint (12), which
forbids W2,3to become "1" simultaneously, as Q1,3 = 0, because a a=0 0 (.8(b) (
setup for Product 1 is necessary in Period 3 (13). Therefore, one can 1 ...2
0.2 (c) 1 (a)
construct a situation which requires the whole set of linkage vari- a=l
ables to become "0." Therefore, it is essential to have no equality
in (10). The first altered constraint type is the capacity constraint that
includes a term for setup times here and replaces (14) of Sox and
Appendix B. Integration of Setup Times into the Gao (1999):
Model Formulation of Sox and Gao (1999) N 1 T+1 1 N
The model formulation of Sox and Gao (1999) needs some adap- E E E -
ai -mit, Yitr,s + Vt = T. (Al)
sti zit, C,
tations to work with instances that include setup times. Therefore, i=1 =0 s=t+lp= i==
1,....,
_
the model formulation used here comprises the objective function
The other changes take care of the case in which the first produc-
(13) and constraints (6), (7), and (14)-(24) of Sox and Gao (1999)- tion run and the first setup activity do not necessarily have to be in
some of them altered slightly as described below-as well as one
the same period. When setup times are not present, the first setup
new constraint set, which are presented in the terminology of Sox
activity will always take place in the period with the first produc-
and Gao (1999) in the following.
tion run. Here, due to limited capacity, a setup activity might be in
the period preceding the first production run (e.g., Product 2 of the
A
Figure Example example in Appendix A, Figure A). Therefore, t > bi is changed to
t > 2 in (16) of Sox and Gao (1999) and constraint type (17) of Sox
Data: j= 2, m= 1 (C,,,,= 200), t= 4 and Gao (1999) is supplemented with
t-I T+1
S hi scj amj stj D"ij, D2 D"3 Dn/4 S =0
-
Yitlo
Vi = 1... N, t = 2, b. (A2)
0 80 0 a=O Yijl,,
1 1 200 1 20 100 j=l s=bi+1
....,
2 1 200 1 80 0 200 10 200 Furthermore, (15) of Sox and Gao (1999) is changed to
bi 1 T+l 1

E
a=O•E
E Yias,
= 1 Vi= 1..., N. (A3)
s=bi +1 3=0
Optimal solution (sum of setup costs): 800
t=1

and
1 10O A 10 bi

E E
T+1 1

Yitosp=1 Vi= 1...N (A4)

2 200 200
•
Z ] ---I time s=l s=t+1p=0

1 2 3 4 is added.

MANAGEMENTSCIENCE/Vol. 49, No. 8, August 2003 1053

 SUERIE AND STADTLER
The CapacitatedLot-Sizing Problem
The model formulation by Sox and Gao (1999) will not find the
optimal solution (even for test instances without setup times), if in
the optimal solution
(a) an arc (product j) with value "1" is required starting in
period t (index 1),
(b) an arc (product j) with value lower than "1" is required
starting in period t - 1 (index 0) ending in period t (index 1), and
(c) a setup for some other product k is required in period t - 1
or earlier, which prohibits other arcs of product j ending in period
t (Index 1), otherwise violating (21) of Sox and Gao (1999).
Figure B shows an example.
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