Use of stochastic programming to find the economical production batch sizes

Abstract

Manufacturing industries continually face the challenge of optimising production and inventory levels. This dissertation presents an example of the translation of a real life scenario within a manufacturing company into an abstract mathematical model with the aim to optimise efficiency. In addition to this, the dissertation gives an introduction to stochastic programming which governs the fundamentals of the model and a detailed description of how the model is implemented in MATLAB. The results obtained are presented and discussed. The actual problem addressed concerns the Paintline department within Methode Electronics, Inc. where motor vehicle components are painted in batches using a single painting machine, after which they are sent to assembly. Stochastic programming techniques are used because the demand of the components is characterised by randomness. The purpose of the project is to find the optimal batch size (also known as the economical lot size) for each of the components that pass through the Paintline department within a manufacturing company such that the efficiency of the department is maximised.