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

Hyunjung Kim, Eungab Kim

Research output: Contribution to journalArticlepeer-review

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.

Original languageEnglish
JournalEuropean Journal of Operational Research
DOIs
StateAccepted/In press - 2022

Keywords

  • Compound Poisson demand process
  • Controllable production rate
  • Demand rationing
  • Hybrid manufacturing
  • Inventory

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