A system of two machines running in batches and a central buffer used for storing raw materials, work-in-process, and finished products is considered. The system maintains enough WIP to assure no stockout will happen in the inventories. Each machine has a finite production rate greater than or equal to the demand rate and thus operates with periodic start-ups and shut-downs. For the special case when the cycle time of both machines are equal to the interval between raw material deliveries, the best policy given limited storage space is determined, and total production cost as a function of set-up costs, carrying cost, storage cost, and material handling cost is presented. A heuristic is developed that determines ‘optimal cycle time’ such that the capacity of the central buffer is not exceeded, and at the same time the overall costs are minimized.