A comparison of make-to-stock and make-to-order in multi-product manufacturing systems with variable due dates

Klaus Altendorfer and Stefan Minner

IISE Transactions, 2014, vol. 46, issue 3, 197-212

Abstract: This article models a single-stage hybrid production system, which can be regarded as a Make To Order (MTO) production system with safety stocks or a Make To Stock (MTS) production system with advance demand information. In an environment with multiple products and variable customer due dates, optimality conditions for safety stocks (base stocks) and safety lead times (work-ahead window) that minimize inventory and backorder costs are derived. For a simplified M/M/1 system with exponentially distributed customer required lead time, an explicit comparison between MTO and MTS is conducted. A pure MTO policy gets relatively more favorable to a pure MTS policy if inventory holding costs increase, backorder costs decrease, the mean customer required lead time increases, or the processing rate increases. In a numerical study, the influence of variance, the behavior of optimal parameters, and the cost reduction potential of this hybrid policy are shown.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://hdl.handle.net/10.1080/0740817X.2013.803638 (text/html)
Access to full text is restricted to subscribers.

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:taf:uiiexx:v:46:y:2014:i:3:p:197-212

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/uiie20

DOI: 10.1080/0740817X.2013.803638

Access Statistics for this article

IISE Transactions is currently edited by Jianjun Shi

More articles in IISE Transactions from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().