A Price-Directed Heuristic for the Economic Lot Scheduling Problem

We formulate the well-known economic lot scheduling problem (ELSP) with sequence dependent setup times and costs as a semi-Markov decision process. Using an affine approximation of the bias function, we obtain a semi-infinite linear program determining a lower bound for the minimum average total cost rate. The solution of this problem is directly used in a price-directed dynamic heuristic to determine a good cyclic schedule. As the state space of the ELSP is non-trivial for the multi-product setting with setup times, we further illustrate how a lookahead version of the price-directed dynamic heuristic can be used to construct and dynamically improve an approximation of the state space. Numerical results show that the resulting heuristic performs competitively.