Effects of Product Structure Complexity on Multi-Level Lot Sizing

As an input to the materials requirement planning (MRP) process, the product structure interacts with the lot-sizing rules to affect inventories, materials flow, and production costs. Despite engineering constraints, considerable latitude is still available to construct alternate product structures for the same product. An important concern of MRP managers and designers is the impact of product structure complexity on the cost performance of the lot-sizing rules. To date, there exists no detailed research that provides managers with guidelines that relate the lot-sizing rules to individual product structure parameters. We report on an extensive experiment to test the effects of individual product structure parameters on the relative cost performance of 11 lot-sizing rules. Three parameters—the number of items, number of levels, and commonality index—are proposed to characterise product structure complexity and used as factors in an experiment involving a large variety of product structures. The results indicate that all three parameters affect the relative cost differences but not the ranking of the rules. The overall best lot-sizing rule is Bookbinder and Koch's [11] rule.

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