Consider a situation where a particular product is produced and placed in in-process inventory until it is needed in a subsequent production process. The number of units required in each of the next 3 months, the setup cost, and the regular-time unit production cost (in units of thousands of dollars) that would be incurred in each month are as follows:
There currently is 1 unit in inventory, and we want to have 2 units in inventory at the end of 3 months. A maximum of 3 units can be produced on regular-time production in each month, although 1 additional unit can be produced on overtime at a cost that is 2 larger than the regular-time unit production cost. The holding cost is 2 per unit for each extra month that it is stored.
Use dynamic programming to determine how many units should be produced in each month to minimize the total cost.

  • CreatedSeptember 22, 2015
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