Dynamic pooling of make-to-stock and make-to-order operations

Zhe George Zhang, Ilhyung Kim, Mark Springer, Cai, Gangshu (George) and Yugang Yu

International Journal of Production Economics, 2013, vol. 144, issue 1, 44-56

Abstract: It has become increasingly common for companies to offer make-to-stock (MTS) and make-to-order (MTO) versions of the same product through different sales channels. To satisfy these two distinct demand streams, one strategy is to produce both the MTS and MTO items in a single “hybrid” facility partially comprised of flexible servers or machines. We develop a multi-server queueing model of this system, where a subset of the servers or machines is dynamically switched between MTS and MTO production via a congestion-based switching policy. We develop analytical formulae for quantifying all major performance measures of the system. We also present a search procedure to find the capacity and inventory control parameters which minimize the total costs of the system while satisfying the customer service constraints. Numerical results are used to illustrate the general behavior of the dynamic hybrid system and to compare its performance to that of a more conventional static hybrid facility with dedicated MTS and MTO servers. For high levels of traffic intensity, the dynamic system is shown to provide superior customer service for both sales channels with lower finished goods inventory levels.

Keywords: Make-to-stock; Make-to-order; Queueing; Capacity sharing; Service interruption (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527313000303
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:144:y:2013:i:1:p:44-56

DOI: 10.1016/j.ijpe.2013.01.012

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().