CORE DISCUSSION PAPER

99XX

THE UNCAPACITATED LOT-SIZING PROBLEM WITH

SALES AND SAFETY STOCKS

Marko Lopari 1 , Yves Po het2 and Lauren e A. Wolsey3

January 1999

Abstra t
We examine a variant of the un apa itated lot-sizing model of Wagner-
Whitin involving sales instead of xed demands, and lower bounds on
sto ks. Two extended formulations are presented, as well as a dynami
programming algorithm and a omplete des ription of the onvex hull
of solutions. When the lower bounds on sto ks are non-de reasing over
time, it is possible to des ribe an extended formulation for the problem
and a ombinatorial separation algorithm for the onvex hull of solu-
tions. Finally when the lower bounds on sto ks are onstant, a simpler
polyhedral des ription is obtained for the ase of Wagner-Whitin osts.

Keywords: lot-sizing, produ tion planning, mixed integer program-

ming, integral polyhedra, extended formulations

1 CORE, Universite Catholique de Louvain. E-mail: lopari  ore.u l.a .be

2 CORE and IAG, Universite Catholique de Louvain. E-mail: po het ore.u l.a .be
3 CORE and INMA, Universite Catholique de Louvain. E-mail: wolsey ore.u l.a .be

The resear h of the rst author was supported by CAPES-Brazil.

This text presents resear h results of the Belgian Program on Interuniversity Poles of
Attra tion initiated by the Belgian State, Prime Minister's OÆ e, S ien e Poli y Pro-
gramming. The s ienti responsability is assumed by the authors.
1 Introdu tion

The original un apa itated single item lot-sizing model of Wagner-Whitin

[13℄ has been extended in many dire tions, to in lude among others ba klog-
ging [14℄, apa ities [3℄, [9℄, start-ups [4℄ and produ tion in series [8℄. There
is a vast literature both on these problems and on more general multi-item
problems ontaining the single-item problem as subproblem [6℄,[11℄. In all
these models demand is assumed to be known exa tly, and the usual obje -
tive is to minimize total ost. Re ently we have en ountered several models
onstru ted by an industrial partner in whi h demand is not pre-spe ied,
but bounds on potential sales are presented, and the obje tive is prot max-
imization [5℄. In an attempt to improve the formulation of these models, we
have been led to onsider a single item lot-sizing problem with sales, and
in addition, for reason of pra ti al appli ability, we have also in orporated
lower bounds on sto ks (safety sto ks) in the model.
Below we rst spe ify the ULS3 problem (Un apa itated Lot-sizing Prob-
lem with Sales and Safety Sto ks), and then formulate it as a mixed integer
program. We then derive equivalent formulations in whi h there is a xed
demand (positive or negative) as well as potential sales. Next we analyse
the stru ture of the optimal solutions whi h allows us to on lude in stan-
dard fashion that dynami programming provides a polynomial algorithm
for ULS3 . We then terminate the introdu tion with an overview of later
se tions.
Problem ULS3 is spe ied by a time horizon n, an initial sto k L0  0,
and for ea h period t = 1; : : : ; n, upper bounds ut  0 on sales, lower bounds
on sto ks Lt  0, and obje tive oeÆ ients onsisting of unit selling pri es
pt , unit produ tion and storage osts t and ht , and xed set-up osts of
produ tion ft .
Introdu ing variables
xt : produ tion in period t,
st : sto k at the end of period t (s0 : initial sto k),
vt : sales in period t,
yt 2 f0; 1g, a set-up variable with yt = 1 if xt > 0,

1
we obtain the prot maximization formulation

X
n X
n X
n X
n
max pt vt t xt ft yt ht st ;
t =1 t =1 t =1 t=1
st 1 + xt = vt + st ; for t = 1; : : : n; (1)
0  vt  ut ; for t = 1; : : : n; (2)
(F 1) xt  Myt ; for t = 1; : : : n; (3)
st  Lt ; for t = 1; : : : n; (4)
s0 = L0 ; (5)
xt  0; 0  yt  1; for t = 1; : : : n; (6)
yt integral; for t = 1; : : : n: (7)
where M is a large positive onstant. Constraint (3) for es yt to one when
xt is P
positive, but there is always an optimal solution
P with xt < M unless
t + i=t hi < 0. Any value of M greater than t=1 ut + maxt=1;:::;n Lt is
n n

suÆ ient. Note that it is possible to eliminate the variables xt or st from

the obje tive fun tion, and so one an assume for onvenien e either that
t = 0 for all t, or that ht = 0 for all t.
We now present an equivalent problem. The dieren e is the introdu tion
of (possibly negative) demands dt and the new sto k variables t whi h have
lower bound of zero. The onstraints now take the form:

X
n X
n X
n X
n
max pt vt t xt ft yt ht t ;
t=1 t=1 =1
t t=1
t 1 + xt = dt + vt + t ; for t = 1; : : : n; (8)
0  vt  ut ; for t = 1; : : : n; (9)
(F 2) xt  Myt ; for t = 1; : : : n; (10)
0 = 0; t  0; for t = 1; : : : n; (11)
xt  0; 0  yt  1; for t = 1; : : : n; (12)
yt integral; for t = 1; : : : n: (13)
We go from the rst formulation to the se ond by taking t = st Lt and
dt = Lt Lt 1 , for all t. To
P go from the se ondPformulation to the rst, we
take L0 = maxf0; maxt [ i=1 di ℄g, Lt = L0 +
t
i=1 di , and st = Lt + t for
t

all t. The tradeo between (F1) and (F2) is between having lower bounds
Lt on sto ks, or having external demands dt . Figure 1 presents an instan e
of this transformation.

2
 s0 = 3 s1  5 s2  2 s3  4 s4  3
1 2 3 4

0 = 0 1  0 2 0 3 3  0 4 0
1 2 4
2 3 2 1
Figure 1: Transforming lower bounds on sto ks into demands

P
Dening dij = jt=i dt and using t = ti=1 xi
P
d1t  0 from
P
i=1 vi
t

(8) to eliminate the variables t , we obtain a third formulation whi h will

also be useful:

X
n X
n X
n
max pt vt t xt ft yt ;
t=1 t=1 t=1
X
t X
t
xi  v i + d 1t ; for t = 1; : : : n; (14)
i =1 i=1
(F 3) 0  vt  ut ; for t = 1; : : : n; (15)
xt  Myt ; for t = 1; : : : n; (16)
xt  0; 0  yt  1; for t = 1; : : : n; (17)
yt integral; for t = 1; : : : n: (18)
Note that the three formulations are equivalent in the sense that there is a
1-1 orresponden e between their feasible solutions. Let X  R3n be the set
of feasible solutions of (F3) des ribed by (14)-(18).
To derive an algorithm for ULS3 we next onsider P the stru ture of the
optimal solutions. We suppose that ft  0 and t + i=t hi  0 for all t, so
n

that there is always an optimal solution with xt < M . Consider formulation

(F2). If y 2 f0; 1gn is xed, the remaining problem is a minimum ost
ow problem in the network shown in Figure 2. In a basi optimal solution
(x ; v ;  ), the basi variables form an a y li graph [14℄. Su h a basi op-
timal solution de omposes in a standard way into a sequen e of regeneration
intervals.
We now look at intervals [i; i + 1; : : : ; j ℄ in whi h i 1 = 0, i >

3
 d14
s
x1 x5
x2 x3 x4
1 2 3 4
1 2 3 4 5
d1 d2 d3 d4 d5
v2 v3 v4
v1 v5
5
t
Figure 2: ULS3 in a network

0; : : : ; j 1 > 0, and either j = 0, or j = n and n > 0. Consider rst
an interval with j = 0 alled a regeneration interval of Type 1, see Figure
3. Clearly if 0 < xk < M and 0 < xl < M with i  k < l  j , the set

s
xk




=0 i > 0 i+1 > 0


> 0 k > 0


> 0 j -1 > 0 j =0

Figure 3: Regeneration interval of Type 1

of basi variables forms a y le. So there is at most one period k in the

interval [i; : : : ; j ℄ with xk > 0. If xk > 0, all variables vl are equal to 0 or
ul to avoid reating a y le. Alternatively if xk = 0 for all k = i; : : : ; j , then
one variable vl an be basi with 0 < vl < ul .
For regeneration intervals of Type 2 with j = n and n > 0, the situation
is as shown in Figure 4. Again (t; s) is basi , and thus xk = 0 and vk = 0 or
uk for all k = i; : : : ; j .
We now derive a dynami program or shortest path problem using re-
generation intervals to solve ULS3 .

4
 s
xk




=0 i > 0 i+1 > 0


> 0 k > 0


> 0 n-1 > 0 n

t n > 0

Figure 4: Regeneration interval of Type 2

Consider a regeneration interval [i; : : : ; j ℄ of Type 1. The value ij of

an optimal solution within this interval an be found by solving j i + 2
minimum ost ow problems. There are j i + 1 problems, one for ea h
l = i; : : : ; j . In the problem asso iated with a xed l, we allow xl > 0 and
yl = 1, and xt = yt = 0 for t 6= l. There is also a nal problem in whi h
xt = 0 for t = i; : : : ; j , whi h orresponds to the ase of no produ tion
(this also in ludes the regeneration intervals of Type 2). For l 2 fi; : : : ; j g,
problem l is
X
j X
j
 = max
l
ij pt vt l xl ht t fl ;
=
t i =
t i
l 1 + xl = dl + vl + l ;
t 1 = dt + vt + t ; for t = i; : : : j; t 6= l;
i 1 = 0;
j = 0; if j 6= n;
0  vt  u t ; for t = i; : : : j;
xt ; t  0; for t = i; : : : j:
ij0 is dened similarly but with xl = 0 and without the ost term fl , and
ij = max[ij0 ; maxl=i;:::;j ijl ℄. Note that it is not ne essary to solve the
above problems by linear programming to al ulate ijl .
Dening the re ursion F (0) = 0, F (j ) = maxij fF (i 1) + ij g, the
optimal value of problem ULS3 is given by F (n). Working ba kwards leads
to an optimal solution.
We now dis uss the ontents of the paper. In Se tion 2 we give the main
result, a family of valid inequalities, alled (t; S; R) inequalities, that are

5
shown to provide a omplete des ription of the onvex hull of X . In Se tion
3 we onsider the spe ial ase of ULS3 in whi h the lower bounds Lt are
nonde reasing over time in formulation (F1), or alternatively dt  0 for all
t in formulations (F2) and (F3). We rst derive an extended formulation
allowing one to solve ULS3 dire tly by linear programming, and then give
a ombinatorial separation algorithm for the family of (t; S; R) inequalities.
Finally in Se tion 4 we provide an extended formulation for the ase where
dt = 0 for all t in formulation (F2) and where we have \Wagner-Whitin"
osts. We terminate with a brief dis ussion of open questions and extensions.

2 The Convex Hull

To motivate the inequalities developed in this se tion, onsider the small

example shown in Figure 5, where d = (3; 2; 4; 1) and u = (1; 1; 1; 1).
x1 x2 x3 x4
1 2 3 4
1 2 3 4

3 v1 2 v2 4 v3 1 v4

Figure 5: Small example

Examining periods 3 and 4, the in ow-out ow inequalities from [12℄, or the

(l; S ) inequality of [1℄ with l = 4, S = f3; 4g give the valid inequality

x3 + x4  5y3 + 1y4 + v3 + v4 + 4
where the oeÆ ient (d3 + d4 ) of y3 is the amount of in ow in x3 that ould
es ape through the demand nodes d3 , d4 , and not through the ar s v3 , v4 or
4 .
However the above inequality does not take into a ount the fa t that
d2 is negative. Be ause d2 = 2 < 0, 2  d2 v2 , and so 2 + x3 
(d3 + d4 ) + v3 + v4 + 4 implies x3  (d2 + d3 + d4 ) + v2 + v3 + v4 + 4 . Thus
the maximum in ow through x3 that does not ow out through v2 , v3 , v4
or 4 is d2 + d3 + d4 = 3. This leads us to the inequality

x3 + x4  3y3 + 1y4 + v2 + v3 + v4 + 4 :

6
 Now by introdu ing the omplementary variables vj = uj vj for j 2
R = f1; 3g, we onvert u1 and u3 into xed demands but with additional
in ow v j , leading to the situation shown in Figure 6:
x1 x2 x3 x4
1 2 3 4
1 2 3 4

3+1 v1 2 v2 4+1 v3 1 v4
Figure 6: Small example after substitutions

Now we obtain
x3 + x4  4y3 + 1y4 + v2 + v4 + 4
with the oeÆ ient P of y3 Pequal to (d2 + d3 + u3 + d4). Eliminating 4 via
the equation 4t=1 xt = 4t=1 vt + d14 + 4 , obtained by summing (8) for
t = 1; : : : ; 4, the resulting inequality is
x1 + x2 + 4y3 + 1y4  6 + v1 + v3 : (19)
Now we des ribe formally a family of valid inequalities, alled (t; S; R)
inequalities, generalizing the previous example. We show that they provide
all the inequalities missing in formulation (F3) to des ribe the onvex hull
of the solutions of ULS3 .
In order to ompute the oeÆ ients of the y variables we dene for
R  f1; : : : ; ng and 1  i; j  n:
P
1. dij = ikj dk , for 1  i  j  n, dij = 0, if i > j ;
P
2. uR
ij = 2   uk , for 1  i  j  n, uij = 0, if i > j ;
R
k R;i k j

3. ~bR
i = maxt=0:::i (u1t + d1t ), for i = 0; : : : ; n;
R

1t + d1t ) = ~bi g, for i = 0; : : : ; n;

4. (R; i) = minft 2 f0; : : : ; ig : (uR R

5. ~bR i 1  0, for 1  i  j  n.
~R ~bR
ij = bj

Note that, if  = (R; i), uRt+1; + dt+1;  0, for 0  t <  , and that
u +1;t + d +1;t  0, for  < t  i. For example, in inequality (19) with
R

R = f1; 3g, we have ~bR4 = 8, (R; 4) = 4, ~bR2 = 4, (R; 2) = 1, and ~bR34 = 4.

7
Proposition 2.1 The (t; S; R) inequalities
X X ~R X
xj + bjt yj  vj + d1t ; (20)
2 n j T Sj 2S j 2R

are valid for X for all 1  t  n; T = f1; : : : ; tg; S T and R  T , su h

that t = (R; t).

Proof. Let (x ; y ; v ) 2 X. Suppose yi = 0 for all i 2 S . Then as xi = 0

for i 2 S ,
X  X ~R  X  X  X
xj + bjt yj = xj  vj + d1t  vj + d1t :
2 n
j T S 2
j S 2 j 2T
j T j 2R

Otherwise let k = minfi 2 S : yi = 1g. Let  = (R; k 1). As  k 1,

xj = 0 for j 2 S with j   . Then
X  X X  X  X 
xj  xj = xj  vj + d1  vj + d1 : (21)
2 n
j T S 2 n 
j T S;j  
j  j   2 
j R;j 

Also,
X ~R 
bjt yj  ~bRkt = ~bRt ~bRk 1 = uR1t + d1t (uR1 + d1 )
j 2S
X X 
= uj + d +1;t  vj + d +1;t : (22)
2
j R; +1j t 2
j R; +1j t
Adding (21) and (22), the result follows.

Theorem 2.2 The inequalities (20) together with the inequalities (15)-(17)
des ribe onv(X ).

P M ( ; f; p)  X be the set of all optimal solutions of the problem

Let
maxf ni=1 ( i xi fiyi + pi vi ) : (x; y; v) 2 X g.
To prove the theorem we need two lemmas hara terizing the solutions
of M ( ; f; p), whi h hold subje t to ertain onditions. We onsider a non-
negative ost ( ; f; p), an optimal solution (x ; y ; v ) 2 M ( ; f; p) and an
integer q 2 f1; : : : ; n + 1g. We dene R = fj : pj > 0g and  = (R; q 1).
The onditions are:
Condition A: q 2 f1; : : : ; n + 1g satises ondition A if either

8
 a) q = n + 1, or
b) q 6= n + 1, q = 0 and either fq = 0 or yq = 1.
Condition B: q 2 f1; : : : ; n + 1g satises ondition B if for ea h j 2
f1; : : : ;  g, either j > 0 or yj = 0.
Lemma 2.3 If q satises ondition A, then
6 q, xj = 0 whenever j > 0;
1. for j =  + 1; : : : ; n, j =
6 q, yj = 0 whenever fj > 0; and
2. for j =  + 1; : : : ; n, j =
3. for j =  + 1; : : : ; n, vj = uj whenever pj > 0.

Proof. In ea h ase we will assume the ontrary and produ e a solution

(x0 ; y0 ; v0 ) whi h has higher value than (x ; y ; v ), ontradi ting the assump-
tion of optimality for (x ; y ; v ). Where not otherwise spe ied, (x0 ; y0 ; v0 )
oin ides with (x ; y ; v ).
1) Suppose we have some j 6= q,  + 1  j  n, with j > 0 and xj > 0.
Make x0j = 0 and vk0 = 0 for k 62 R. If q 6= n + 1, make x0q = xq + xj
and yq0 = 1. To verify that (x0 ; y0 ; v0 ) 2 X , we must show that it satises
inequality (14) for all t. If t < j or t  q, this fa t is immediate as
X
t X
t X
t X
t
x0k = xk  vk + d1t  vk0 + d1t :
k =1 k =1 k =1 k =1
Otherwise j  t  q 1, and it follows that
Pt x0  P x0 ( < t)
k =1 k Pk =1 k
= Pk=1 xk
  ( < j )
 Pk=1 vk + d1 ((x ; y ; v ) is valid)
 Pk=1 vk + uR+1;t + d1t  +1;t + d +1;t  0)
(uR
 0
 Pk=1 vk + P u +1;t + d1t
R
(vk0  vk ; 8k)
0 0
 Pk=1 vk + k= +1;k2R vk + d1t
 t
(vk0  uk ; 8k)
0 (vk0 = 0; 8k 62 R)
= k =1 vk + d1t :
t

Solution (x0 ; y0 ; v0 ) is worth j xj more than (x ; y ; v ), sin e if q 6= n + 1

q = 0 and either fq = 0 or yq0 = yq = 1, and pk = 0 for k 62 R.
2) Suppose we have some j 6= q,   j  n, with fj > 0 and yj = 1.
We onstru t (x0 ; y0 ; v0 ) in the same way as the above ase and in addition
we set yj0 = 0. Solution (x0 ; y0 ; v0 ) is worth j xj + fj more than (x ; y ; v ).
Note that j and xj may be zero.

9
 3) Suppose we have some j ,  < j  n, with pj > 0 and vj < uj . Make
vj = uj and vk0 = 0 for k 62 R. If q 6= n + 1, make x0q = xq + uj vj
0
and yq0 = 1. Everything shown for ase 1) holds also for this ase and the
reader an verify the validity of the inequalities (14) following the same
steps. Solution (x0 ; y0 ; v0 ) is worth pj (uj vj ) more than (x ; y ; v ).

Lemma 2.4 If q satises onditions A and B, then

1.
P x = P v + d , and
k =1 k k =1 k 1
2. for j = 1; : : : ;  , vj = 0 whenever pj = 0.

Proof. We pro eed in the Psame way as Pin Lemma 2.3.

that s = k=1 xk   d1 is positive. Then, if
P 1) xSuppose k =1 vk
 
 = 0, we have
k =1 k
X 
vk d1 > 0
k =1

whi h implies, sin e u1 + d1  0 and vk  0 for all k, that
R

X

vk < uR1 :
k =1;k2R
P P
Hen e either k=1 xk > 0 or k=1;k2R vk < uR 1 . It follows that there exists
j 2 f1; : : : ;  g with either xj > 0, or j 2 R and vj < uj . Choose the largest

su h j . Then for k = j + 1; : : : ;  , xk = 0 and vk = uk when k 2 R.
Case A: Suppose rst that xj > 0 and take  = minfs; xj g. Make vk0 = 0
for k 62 R, x0j = xj , and x0q = xq +  in ase q 6= n + 1. We need to show
that (x0 ; y0 ; s0 ) 2 X by showing that it satises (14).
For t = j; : : : ;  we have
Pt x0  Pt x  (j  t; xj  ; q > j )
k =1 k Pk =1 k
= Pk=1 xk  (xk = 0; 8k = j + 1; : : : ;  )
 
 Pk=1 vk + P
d1 (s  )
 
 Pk=1 vk + k=t+1;k2R vk + d1
t 
(t  ; vk  0)
= t 
v +u R
+d 1 
(v = u ; 8k 2 R;
k =1 k t+1; k k

Pt v + d k = j + 1; : : : ;  )
 Pk =1 k 1t t+1; + dt+1;  0)
(uR
 tk=1 vk0 + d1t : (vk0  vk ; 8k)

10
 Case B: Suppose now that vj < uj , j 2 R, and take  = minfs; uj vj g.
Make vj0 = vj +  and vk0 = 0 for k 62 R. If q 6= n + 1, make x0q = xq +  and
yq0 = 1. For t = j; : : : ;  we have
Pt x0 Pt 
k =1 k =
=
Pk=1 xxk ( x
(t < q)
 = 0; 8k = j + 1; : : : ;  )
Pk=1 vk + d + 
 P
k
(s  )
k =1 k 1
 Pk=1 vk0 + P
d1 (vj0 = vj + ; vk0  vk ; 8k 6= j )
= Ptk=1 vk0 + k=t+1;k2R vk0 + d1 (vk0 = 0; 8k 62 R)
= t 0
v +u=1 R
+d 1 0
(v = v = u ; 8k 2 R;
k k t+1; k k k
k = j + 1; : : : ;  )
 Ptk=1 vk0 + d1t : (ut+1; + dt+1;  0)
R

In both ases we have shown the validity of inequalities (14) for t =

 q, the validity is immediate. Finally, for t =
j; : : : ;  . For t < j or t
 + 1; : : : ; q 1,
Pt x0  P x0 ( < t)
k =1 k k =1 k
 P v0 + d k =1 k 1 (already shown
P v0 + uR + d for the ase t =  )
 P k =1 k  +1;t 1t  +1;t + d +1;t  0)
(uR
 Pk=1 vk0 + Ptk= +1;k2R vk0 + d1t (vk0  uk ; 8k)
0 (vk0 = 0; 8k 62 R)
= =1 vk + d1t :
t
k

In ase A solution (x0 ; y0 ; v0 ) is worth  j more. As xj > 0; yj = 1 and

thus by hypothesis j > 0. In ase B, (x0 ; y0 ; v0 ) is worth pj more, and
pj > 0 as j 2 R.
2) Suppose vj > 0 with 1  j   and pj = 0. To see that (x ; y ; v )
annot be an optimal solution it suÆ es P to hange it
P by setting vj = 0. The
solution is worth the same, but now s = k=1 xk  d1 is positive.
k =1 vk


As we have shown in part 1) of the proof, su h a solution annot be optimal.

Proof of Theorem 2.2. We use a te hnique due to Lov asz [7℄. For an
P
arbitrary non-zero obje tive fun tion max ni=1 ( i xi fi yi + pi vi ) we will
show ase by ase that all points in M ( ; f; p) satisfy one of the inequalities
(20), (15), (16) or (17) at equality (note that inequalities (14) are spe ial
ases of (20)). This proves that the des ription of the onvex hull is omplete,
sin e when the obje tive fun tion is parallel to a fa et of the polyhedron the

11
 orresponding fa et-dening inequality is the only valid inequality that is
satised at equality by all optimal solutions.
If i < 0 for some i, then M ( ; f; p)  f(x; y; v) : xi = Myig. If fi < 0
for some i, then M ( ; f; p)  f(x; y; v) : yi = 1g. If pi < 0 for some i,
then M ( ; f; p)  f(x; y; v) : vi = 0g. We suppose next that , f and p are
non-negative.
As ( ; f; p) 6= 0, we an dene l as the last period su h that l , fl and
pl are not all zero. Let t = (R; l), T = f1; : : : ; tg, S = fi 2 T : i = 0g and
R = fi : pi > 0g.
Suppose there is k  l su h that k = fk = 0. Then Lemma 2.3 an be
applied with q = k and j = l. If pl > 0, then M ( ; f; p)  f(x; y; v) : vl =
ul g. Otherwise pl = 0 and thus k < l and either l > 0 or fl > 0. It follows
that M ( ; f; p)  f(x; y; v) : xl = 0g or M ( ; f; p)  f(x; y; v) : yl = 0g. So
we assume from now on that there is no su h k, and so fi > 0 for all i in S .
Suppose next that pi > 0 for some i > t. Then Lemma 2.3 an be applied
with q = l + 1 and by 3) M ( ; f; p)  f(x; y; v) : vi = ui g. So from now on
we an assume that R  T .
Consider an optimal solution (x ; y ; v ) in M ( ; f; p). We now show
that the inequality (20) holds at equality.
Suppose rst that yi = 0 for all i 2 S . Then
X  X  X ~R 
xj = xj ; and bjl yj = 0:
2 n
j T S 2
j T 2
j S

Sin e l = n or l+1 = fl+1 = 0, and for i 2 T yi = 1 implies that i 62 S

and hen e i > 0 for i  (R; l) su h that yi = 1, Lemma 2.4 an be applied
with q = l + 1: X  X 
1) gives xj = vj + d1t ;
j 2T j 2T
X  X  X 
and 2) gives vj = vj = vj :
j 2T j 2R\T j 2R

So, X  X ~R  X  X  X
xj + bjl yj = xj = vj + d1t = vj + d1t ;
j 2T nS j 2S j 2T j 2T j 2R

and the inequality (20) holds at equality.

Otherwise take k = minfi 2 S : yi = 1g. Let  = (R; k 1). Applying
Lemma 2.3 with q = k, yk = 1 and k = 0,
X
xj = 0 using 1), (23)
2 n
j T S;j>

12
 X ~R  ~R ~R ~R
bjt yj = bk;t = bt bk 1 using 2), and (24)
j 2S
X  R
vj = u +1;t using 3): (25)
2 j R;j>

We have k = 0, yk = 1 and j > 0 for all 1  j  k 1 with yj = 1 by

denition of k. So applying Lemma 2.4 with q = k, 1) gives
X  X 
xj = vj + d1 ; (26)

j  
j 

and by 2), X  X 
vj = vj : (27)
j  2 
j R;j 

Now using (24),

X  X ~R  X  ~R ~R
xj + bjt yj = xj + bt bk 1 :
2 n
j T S 2
j S 2 n
j T S

Now, by the fa t that ~bR ~R  2 S and j    k

k 1 = b , that xj = 0 if j 1,
and from (23),
X  ~R ~R X X
xj + bt bk 1 = xj + xj + ~bRt ~bRk 1
2 n 2 n  2 n
j T S
X
j T S;j 
 ~R
j T S;j>
~b :
= xj + bt R


j 

From (26), (27) and the denition of ~bR

i
X  ~R ~R X
xj + bt b = vj + d1 + uR1t + d1t (uR1 + d1 );
 2 
j 
X
j R;j 

= vj + uR+1;t + d1t :

2 
j R;j 

Finally, from (25),

X X 
vj + uR+1;t + d1t = vj + d1t ;
2 
j R;j  2
j R

and the proof is omplete.

13
3 ULS3 with non-negative demands

When dt  0 for all t, ULS3 simplies in a variety of ways. It is natural to x

n = 0, and it is no longer ne essary in a regeneration interval to onsider
a solution with 0 < vt < ut as this would only be possible if xk = 0 for all k
in the interval, and then it is impossible to produ e vt > 0. So we restri t
attention to the set X~ = X \ f(x; v; y; ) : n = 0g, and the orresponding
fa e onv(X~ )= onv(X ) \ f(x; v; y; ) : n = 0g. The inequalities xt  Myt
are no longer ne essary to des ribe onv(X~ ). Also the value ~bR ij used in
des ribing fa ets is given dire tly by bij = uij + dij for 1  i  j  n.
~ R R

Proposition 3.1 Every extreme point is hara terized by three sets I; J; K 

f1; : : : ; ng, I = ft1 < t2 < : : : < tq g  J where
(
1; if t 2 J;
yt = 0; otherwise;
(
vt = ut ; if t 2 K;
0; otherwise;
( Ptj+1 1
i=tj (vi + di ); if t = tj 2 I;
xt =
0; otherwise:
where we take tq+1 = n + 1.
Now we present an extended formulation for X~ . We let bt = ut + dt for
all t, and introdu e the 0-1 variables ij , ij where ij = 1 if the amount dj
is produ ed in period i  j and ij = 1 if the amount dj + uj is produ ed
in period i  j . The resulting formulation is:
X X X
max pt vt ft yt t xt ;
t
X t t

(bj ij + dj ij ) = xi ; i = 1; : : : ; n;

X j i

(F 4) (bj ij + dj ij ) = vj + dj ; j = 1; : : : ; n;

i j
X
(ij + ij ) = 1; j = 1; : : : ; n;

i j
(ij + ij )  yi ; 1  i  j  n;
vi ; yi ; xi ; ij ; ij  0; 1ijn
yi  1; i = 1; : : : ; n:

14
Let P  be the polytope dened by the onstraints of (F4).
It is readily veried that the points in P  with ; ; y integer are the
points of X~ , so P  is a valid extended formulation for X~ , and onv(X~ ) 
projx;y;v P  .

Proposition 3.2 projx;y;v P  = onv(X~ ).

Proof. Consider a point (x; y; v; ;  ) in P  and let us show that (x; y; v) is

in onv(X~ ). It suÆ es to show that
P (x; y; v)Psatises the inequalities whi h
des ribe onv(X ) and that n = nt=1 xt n
v
t=1 t d1n = 0. Indeed,
X
n X
n X X
n X X
n
xt = (bj tj + dj tj ) = (bj tj + dj tj ) = vj + d1n ;
t=1 t =1 j t j =1 tj j =1
what implies that n = 0. Also,
X
t X
t X
n t X
X j X
t
xk = (bj kj + dj kj )  (bj kj + dj kj ) = (vj + dj );
k =1 k =1 j =k j =1 k=1 j =1
X X
vt = (bt it + dt it ) dt  bt (it + it ) dt = bt dt = ut ;

i t 
i t
X X
vt = (bt it + dt it ) dt  dt (it + it ) dt = dt dt = 0;

i t 
i t
X X X
xt = (bj tj + dj tj )  bj (tj + tj )  bj yt  Myt ;
 j t j t j t

so the inequalities (14)-(16) are satised. Also learly (17) holds. We om-
plete the proof by he king for the (t; S; R) inequalities (20):

X X ~bR
xk + kt yk =
2
k S 2 n
k T S

XX X X X
= (bj kj + dj kj ) + ( b j yk + dj yk )
2 
k Sj k 2 n  2 k T S j k;j R j k;j 2T nR
X X X X
= (bj kj + dj kj ) + (bj kj + dj kj ) +
k 2S j k;j 2R k 2S j k;j 2T nR
X X X X
+ bj yk + dj yk
k 2T nS j k;j 2R k 2T nS j k;j 2T nR

15
 X X X X
 (bj kj + dj kj ) + dj (kj + kj ) +
2  2
k S j k;j R k 2S j k;j 2T nR
X X X X
+ bj (kj + kj ) + dj (kj + kj )
 2
Xk2T nX Xk2T nSXjk;j2T nR
S j k;j R

 (bj kj + dj kj ) + dj (kj + kj )
k 2T j k;j 2R k 2T j k;j 2T nR
XX X X
= (bj kj + dj kj ) + dj (kj + kj )
j 2R k j j 2T nR k j
X X
 (vj + dj ) + dj ;
j 2R j 2T nR
X
= vj + d1t :
j 2R

Now we onsider the separation problem for onv(X~ ). Suppose that a

point (x ; y ; v ) satises (14)-(17), and n = 0, but is not in onv(X~ ). Then
by Theorem 2.2 at least one of the inequalities
X X ~R X
xj + bjt yj  v k + d 1t
2 n
j T S 2
j S 2
k R

is violated. Sin e dt  0 for all t implies ~bR

ij = ujt + djt , for a xed t and
R

T = f1; : : : ; tg the separation problem an be solved by minimizing over

R; S  f1; : : : ; tg, the dieren e
X  X R X 
xj + (ujt + djt )yj vk
2 n
j T S j S 2 2
k R

whi h an be rewritten as
X  X  X X X 
xj + yj ( uk ) + djt yj vk :
2 n
j T S 2
j S 2 
k R;j k t 2
j S 2
k R

To minimize this expression, we take  and  respe tively as the har-

a teristi ve tors of S and R = T n R. We then minimize over  and 
X
t X
t X
t X
t X
t
xj (1 j ) + uk yj j (1 k ) + djt yj j vk (1 k )
j =1 j =1 k=j j =1 k =1

16
whi h is equivalent to minimizing
X
t X
t X
t X
t X
t
( (uk + dk )yj xj )j + vk k uk yj j k :
j =1 k =j k =1 j =1 k=j
It is well known that minimizing a quadrati boolean fun tion in whi h
all quadrati terms have non-positive oeÆ ient redu es to a maximum ow
problem. Thus solving for ea h t = 1; : : : ; n leads to a polynomial algorithm.

4 ULS3 with Zero Demands and Wagner-Whitin

Costs

With dt  0 for all t as in the previous se tion, the fa et-dening inequalities
still depend on subsets S and R. Here, when dt = 0 for all t, we show that
the number of fa ets, though still exponential, de reases by an order of
magnitude in the presen e of Wagner-Whitin osts. To see this we again
introdu e an extended formulation.
Assume that the ost fun tions t ; ht satisfy the Wagner-Whitin on-
dition t + ht  t+1 for t = 1; : : : ; n 1. Alternatively eliminating the
produ tion variables from the obje tive fun tion, the resulting storage osts
h0t = t + ht t+1  0. This restri tion says that, ignoring xed osts, it is
always best to produ e as late as possible. Formulations in the presen e of
Wagner-Whitin osts have been studied in [10℄.
As the amount sold in period t is either 0 or ut in an optimal extreme
solution, we an dene the following 0-1 variables:
wt = 1 if vt = ut in period t, and wt = 0 if vt = 0 (wt = vt =ut )
Ækl = 1 if vl = ul and the sto k at the end of k ontains the orrespond-
ing sale ul .
Clearly Ækl = max(0; wl
P
t=k +1 yt ) due to the Wagner-Whitin property.
l

The resulting formulation is:

X
n X
n X
n
max pt ut wt ft yt h0t t ;
t=1 t=1 t =1
X
n
k = ul Ækl 1k<t (28)
= +1
l k

17
 X
l
Ækl wl + yi  0 1k<lt (29)
= +1
i k

Ækl  0 1k<lt (30)

0  wk  1; 0  yk  1 1kt (31)
yk integer 1kt (32)
Proposition 4.1 The polyhedron Q dened by ontraints (29)-(31) is inte-
gral.
Proof. In fa t the onstraints (29)-(31) dene a totally unimodular matrix.
Sin e the onstraints (30) and (31) are submatri es of the identity, these
rows an be ignored. The same holds for the olumns of (29) orresponding
to the ve tor Æ. Let faij gij be the remaining matrix with the set of olumns
partitioned into set Y = fC1 ; : : : ; Cn g, orresponding to ve tor y, and the
set W = fD1 ; : : : ; Dn g, orresponding to the ve tor w.
We base our proof on the theorem whi h states that faij gij is totally
unimodularPif for any subset P ofa olumns J there is a partition (J1 ; J2 ) of J
su h that j j 2J1 aij j 2J2 ij j  1, for every row i.
Let J be a subset of olumns and let Ci1 ; : : : ; Cip be the olumns of Y
in J . For onvenien e, let i0 = 1 and ip+1 = n + 1.
We allo ate alternatively Ci1 ; Ci2 ; : : : ; Cip to J1 and J2 so that Ci1 2 J1 ,
Ci2 2 J2 and so on. The olumns Di in W are allo ated to the same set as
Cij , where j is su h that ij  i < ij +1 .
Now let us onsider one row of the matrix faij gij . Suppose it or-
responds to variable Ækl . In this row the P non-zero entriesPare 1 for Dl
and 1Pfor Ck+1 ; : : : ; C P l . Dening rY = j 2Y \J1 aij j 2Y \J2 aij and
rW = j 2W \J1 aij j 2W \J2 aij , we have to show that jrW + rY j  1.
Sin e fCk+1 ; : : : ; Cl g orresponds to an interval of olumns of Y , the
olumns of this set are also alternatively allo ated to J1 and J2 . So jrY j  1.
Clearly jrW j  1 also, sin e there is only one non-zero entry in W for ea h
row. Suppose now that rY = 1. Then in parti ular the last olumn in J of
the interval Ck+1 ; : : : ; Cl is allo ated to J1 . So Dl is also allo ated to J1 , and
thus rW = 1. The ase rY = 1 is analogous. Therefore jrW + rY j  1.

Now we onsider the proje tion of Q into the spa e of the original (; v; y)
variables. Using vt = ut wt for all t, and eliminating the Ækl variables in (28)
by using (29) or (30) leads dire tly to the proje tion, and gives a proof of
the next proposition.

18
Proposition 4.2 The polyhedron
X X
l
k  (vl ul yi ); for all U  fk + 1; : : : ; ng and all k; (33)
2
l U = +1
i k
0  vk  u k ; for k = 1; : : : ; n; (34)
0  yk  1; for k = 1; : : : ; n; (35)
0  k ; for k = 1; : : : ; n; (36)
(37)
has y integral at all its extreme points.
Note that the (k; U ) inequalities (33) form a spe ial subset of the (t; S; R)
inequalities. Spe i ally taking t = maxfi : i 2 U g, (33) an be rewritten
as
X
k X
t X X X
k
xj + yi ( uj )  vl + vj ;
j =1 = +1
i k  2
i j t;j U 2
l U j =1
or setting T = f1; : : : ; tg, R = U [ f1; : : : ; kg and S = fk + 1; : : : ; tg as
X X ~R X
xj + bjt yj  vj :
2 n
j T S 2
j S 2
j R

5 Extensions

Various extensions of the type studied for the lassi al un apa itated lot-
sizing model appear important. We have initial results for the onstant
apa ity ase in luding a polynomial algorithm and a generalisation of the
(t; S; R) inequalities. Results for ULS3 with ba klogging and start-up vari-
ables are also needed to treat ertain real-life instan es.
Theoreti ally we have only been able to separate the (t; S; R) inequal-
ities in polynomial time when dt  0 for all t. For formulation (F1), this
means that the lower bounds fLt gnt=0 are nonde reasing. In pra ti e it is
often the ase that the initial sto k L0 is arbitrary, and Lt = L onstant for
t = 1; : : : ; n. Thus the only diÆ ulty arises when L0 > L. In terms of for-
mulation (F3), d1 = L L0 , and dt = 0 for t = 2; : : : ; n. The ombinatorial
separation algorithm an be extended to this ase. Pra ti ally we plan to
develop and test separation heuristi s both for ULS3 and for xed harge
network ows, in whi h paths with both positive and negative demands are
treated, extending the path inequalities developed in [2℄.

19
A knowledgement We are grateful to Serge Rau q for his early omputa-
tional work on the subje t.

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21