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Coordinating Production and Inventory to Improve Service

Author

Listed:
  • Charles R. Sox

    (Department of Industrial & Systems Engineering, Auburn University, Auburn, Alabama 36849)

  • L. Joseph Thomas

    (Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853)

  • John O. McClain

    (Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853)

Abstract

Customer service has assumed strategic importance in most manufacturing environments. Corporate reputations often depend on how reliably promised lead times are met. A goal of filling orders within a service window of T time units is often encountered in practice. This goal ignores the differences among types of units, treating all customers as equally important. Keeping finished goods inventory of all items is only one, and often not the best, way to achieve this objective. High-demand items naturally have safety stock assigned to them, but in many organizations there are so many very-low-demand items that keeping any stock in these items is prohibitively expensive. Customer service can be maintained for these low-demand items by giving them higher production priority when a demand occurs. In this paper, stochastic analysis and simulation are employed to test the merit of this idea. Changes in management structure to allow this type of system are discussed.

Suggested Citation

  • Charles R. Sox & L. Joseph Thomas & John O. McClain, 1997. "Coordinating Production and Inventory to Improve Service," Management Science, INFORMS, vol. 43(9), pages 1189-1197, September.
    • Handle: RePEc:inm:ormnsc:v:43:y:1997:i:9:p:1189-1197
    DOI: 10.1287/mnsc.43.9.1189
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    File URL: http://dx.doi.org/10.1287/mnsc.43.9.1189
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    Citations

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    Cited by:

    1. Awi Federgruen & Ziv Katalan, 1999. "The Impact of Adding a Make-to-Order Item to a Make-to-Stock Production System," Management Science, INFORMS, vol. 45(7), pages 980-994, July.
    2. Beemsterboer, Bart & Land, Martin & Teunter, Ruud, 2017. "Flexible lot sizing in hybrid make-to-order/make-to-stock production planning," European Journal of Operational Research, Elsevier, vol. 260(3), pages 1014-1023.
    3. Zhang, Zhe George & Kim, Ilhyung & Springer, Mark & Cai, Gangshu (George) & Yu, Yugang, 2013. "Dynamic pooling of make-to-stock and make-to-order operations," International Journal of Production Economics, Elsevier, vol. 144(1), pages 44-56.
    4. Ananth V. Iyer & Apurva Jain, 2003. "The Logistics Impact of a Mixture of Order-Streams in a Manufacturer-Retailer System," Management Science, INFORMS, vol. 49(7), pages 890-906, July.
    5. Anthony J. D' Alessandro & Alok Baveja, 2000. "Divide and Conquer: Rohm and Haas' Response to a Changing Specialty Chemicals Market," Interfaces, INFORMS, vol. 30(6), pages 1-16, December.
    6. Boute, Robert N. & Disney, Stephen M. & Lambrecht, Marc R. & Houdt, Benny Van, 2014. "Coordinating lead times and safety stocks under autocorrelated demand," European Journal of Operational Research, Elsevier, vol. 232(1), pages 52-63.
    7. S. Rajagopalan, 2002. "Make to Order or Make to Stock: Model and Application," Management Science, INFORMS, vol. 48(2), pages 241-256, February.
    8. Beemsterboer, Bart & Land, Martin & Teunter, Ruud, 2016. "Hybrid MTO-MTS production planning: An explorative study," European Journal of Operational Research, Elsevier, vol. 248(2), pages 453-461.
    9. Tang, Loon Ching & Lee, Loo Hay, 2005. "A simple recovery strategy for economic lot scheduling problem: A two-product case," International Journal of Production Economics, Elsevier, vol. 98(1), pages 97-107, October.
    10. Soylu, Ahu & Oruc, Cihan & Turkay, Metin & Fujita, Kaoru & Asakura, Tatsuyuki, 2006. "Synergy analysis of collaborative supply chain management in energy systems using multi-period MILP," European Journal of Operational Research, Elsevier, vol. 174(1), pages 387-403, October.
    11. Sato, Yutaro & Maeda, Hiroyuki & Toshima, Ryusei & Nagasawa, Keisuke & Morikawa, Katsumi & Takahashi, Katsuhiko, 2023. "Switching decisions in a hybrid MTS/MTO production system comprising multiple machines considering setup," International Journal of Production Economics, Elsevier, vol. 263(C).
    12. James A. Rappold & John A. Muckstadt, 2000. "A computationally efficient approach for determining inventory levels in a capacitated multiechelon production‐distribution system," Naval Research Logistics (NRL), John Wiley & Sons, vol. 47(5), pages 377-398, August.
    13. Akkerman, Renzo & van Donk, Dirk Pieter, 2007. "Product prioritization in a two-stage food production system with intermediate storage," International Journal of Production Economics, Elsevier, vol. 108(1-2), pages 43-53, July.
    14. Kim, Bowon, 2000. "Coordinating an innovation in supply chain management," European Journal of Operational Research, Elsevier, vol. 123(3), pages 568-584, June.

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