A hybrid manufacturing system with demand for intermediate goods and controllable make-to-stock production rate

Hyunjung Kim and Eungab Kim

European Journal of Operational Research, 2022, vol. 303, issue 3, 1244-1257

Abstract: This paper presents a two-stage hybrid manufacturing system in which the first stage produces semifinished products to store as intermediate inventory in a make-to-stock mode, whereas the second stage produces customized products from semifinished goods in a make-to-order mode. The system faces external demand for semifinished goods with a compound Poisson process and has the option of controlling the make-to-stock production rate. We study the problem of coordinating the controls of order admission, make-to-stock production rate, and inventory rationing for SP demand. The problem is formulated as a Markov decision process model. We identify the structural properties of optimal policies to maximize the long-run average profit. Using a numerical experiment, we examine how the flexibility in make-to-stock production rate and the inventory rationing for semifinished product demand can affect the system performance. We also propose a heuristic and evaluate its effectiveness using example problems.

Keywords: Inventory; Demand rationing; Controllable production rate; Hybrid manufacturing; Compound Poisson demand process (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:303:y:2022:i:3:p:1244-1257

DOI: 10.1016/j.ejor.2022.03.039

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