a b s t r a c t
This paperdevelopsapolynomialalgorithmforobtainingdynamiceconomiclotsizesin
a singleproductmultiperiodproductionsystemwiththeobjectiveofminimizingtotal
production andinventorycostsover T periods.Itisassumedthatproductioncostsare
linear,inventorycostsareconcave,setupcostsarezeroandbackloggingisnotpermitted
in allperiods.Moreover,theunitproductioncostisastochasticvariable,whichis
evolvedaccordingtoacontinuous-timeMarkovprocessovertheplanninghorizon.The
modelisformulatedasastochasticdynamicprogramming(DP)optimizationwiththe
state variablebeingunitproductioncost.Then,itissolvedusingthebackwarddynamic
programmingapproach.Tojustifytheapplicationoftheproposedmodel,twopractical
cases arepresented.