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The Impact of Adding a Make-to-Order Item to a Make-to-Stock Production System

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Author Info

  • Awi Federgruen

    (Graduate School of Business, Columbia University, New York, New York 10027)

  • Ziv Katalan

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

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    Abstract

    Stochastic Economic Lot Scheduling Problems (ELSPs) involve settings where several items need to be produced in a common facility with limited capacity, under significant uncertainty regarding demands, unit production times, setup times, or combinations thereof. We consider systems where some products are made-to-stock while another product line is made-to-order. We present a rich and effective class of strategies for which a variety of cost and performance measures can be evaluated and optimized efficiently by analytical methods. These include inventory level and waiting-time distributions, as well as average setup, holding, and backlogging costs. We also characterize how strategy choices are affected by the system parameters. The availability of efficient analytical evaluation and optimization methods permits us to address the impact of product line diversification or standardization on the performance of the manufacturing system, in particular the logistical implications of adding low-volume specialized models to a given make-to-stock product line.

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    File URL: http://dx.doi.org/10.1287/mnsc.45.7.980
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 45 (1999)
    Issue (Month): 7 (July)
    Pages: 980-994

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    Handle: RePEc:inm:ormnsc:v:45:y:1999:i:7:p:980-994

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    Related research

    Keywords: performance/productivity manufacturing; queues; priorities; inventory/production; multi-item;

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    Cited by:
    1. Ghose, Sanjoy & Liu, John J. & Bhatnagar, Amit & Kurata, Hisashi, 2005. "Modeling the role of retail price formats, and retailer competition types on production schedule strategy," European Journal of Operational Research, Elsevier, vol. 164(1), pages 173-184, July.
    2. Martínez-Olvera, César, 2009. "Benefits of using hybrid business models within a supply chain," International Journal of Production Economics, Elsevier, vol. 120(2), pages 501-511, August.
    3. Olhager, Jan & Prajogo, Daniel I., 2012. "The impact of manufacturing and supply chain improvement initiatives: A survey comparing make-to-order and make-to-stock firms," Omega, Elsevier, vol. 40(2), pages 159-165, April.
    4. 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.
    5. Soman, Chetan Anil & Pieter van Donk, Dirk & Gaalman, Gerard, 2006. "Comparison of dynamic scheduling policies for hybrid make-to-order and make-to-stock production systems with stochastic demand," International Journal of Production Economics, Elsevier, vol. 104(2), pages 441-453, December.
    6. Hongler, Max-Olivier & Ciprut, Philippe, 2001. "Production indices obtained by a myopic policy for non-Markovian dynamics," International Journal of Production Economics, Elsevier, vol. 74(1-3), pages 115-123, December.
    7. Soman, Chetan Anil & Donk, Dirk Pieter van & Gaalman, Gerard, 2002. "Combined make-to-order and make-to-stock in a food production system," Research Report 02A49, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    8. 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.
    9. Soman, Chetan Anil & van Donk, Dirk Pieter & Gaalman, Gerard, 2004. "Combined make-to-order and make-to-stock in a food production system," International Journal of Production Economics, Elsevier, vol. 90(2), pages 223-235, July.
    10. Winands, E.M.M. & Adan, I.J.B.F. & van Houtum, G.J., 2011. "The stochastic economic lot scheduling problem: A survey," European Journal of Operational Research, Elsevier, vol. 210(1), pages 1-9, April.

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