Integrating distribution, machine assignment and lot-sizing via Lagrangean relaxation

The problem of optimally coordinating and integrating complex decisions at the tactical production planning level is considered in this paper. Specifically, our attention is focused on allocating production volumes among the different manufacturing facilities in a network of plants, assigning production quantities to alternative technologies within each plant, determining the production lots for each product on each type of machine in each period. The resulting mathematical programming problem is then solved by means of Lagrangean decomposition techniques. Computational evidence on random problem instances, as well as the application to actual production environments, indicates that the proposed approach is practical and effective.