A Heuristic Algorithm for the Economic Production Quantity with a Piecewise Linear Demand

Short product life cycles, that consists of rapid growth, maturity and decline phases combined with different stage, are becoming very common in many industries especially high technology products. Normally, high technology factories would develop a medium- to long-term production plan that typically covers a time horizon about six months. Therefore, the time horizon may be across over two stages. This study presents a heuristic algorithm for an economic production quantity model with a deterministic piecewise linear function in demand called the “piecewise linear model” that is different from previous inventory models focusing on linear trend in demand with a strict assumption that is no inventory to be held at the end of each stage. Moreover, a piecewise linear function can be approximated a nonlinear function. This study does not concentrate on this, but it provides a simple algorithm to easily deal with this problem. Although our approach is a heuristics, our algorithm is better than the sum of two independent single-piece linear models on the total cost’s performance. A general procedure for solving these problems is provided and numeric examples for illustrating our proposed model are given as well. Index Terms - Economic production quantity (EPQ), Linear trend in demand, Piecewise linear demand.