abstract
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This paper presents two basic, deterministic, infinite horizon models for a serial multi-stage production/ inventory system. One model assumes that the lot size is maintained through all production stages while transportation of equal sized sub-batches is allowed between stages. Consequently, only one set-up cost is incurred for each stage; however, the transportation cost of sub-batches must also be considered. An op timal solution is presented for this first model. The other model has varying lot sizes with lot-sized in tershipments assuming certain integrality restrictions on the splitting of lots and monotonically increasing stage inventory holding costs. A good approximation to the optimal solution is given for this second model. Comparison of the two models provides an insight into the characteristics of multi-stage production systems. The efficiency of the computational procedures des cribed is demonstrated with extensive computational experience.