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

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  • Klaus Altendorfer
  • Stefan Minner

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.

Suggested Citation

  • Klaus Altendorfer & Stefan Minner, 2014. "A comparison of make-to-stock and make-to-order in multi-product manufacturing systems with variable due dates," IISE Transactions, Taylor & Francis Journals, vol. 46(3), pages 197-212.
    • Handle: RePEc:taf:uiiexx:v:46:y:2014:i:3:p:197-212
    DOI: 10.1080/0740817X.2013.803638
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    Cited by:

    1. Christian Finnsgård & Joakim Kalantari & Zeeshan Raza & Violeta Roso & Johan Woxenius, 2018. "Swedish shippers’ strategies for coping with slow-steaming in deep sea container shipping," Journal of Shipping and Trade, Springer, vol. 3(1), pages 1-24, December.
    2. Pereira, Daniel Filipe & Oliveira, José Fernando & Carravilla, Maria Antónia, 2022. "Merging make-to-stock/make-to-order decisions into sales and operations planning: A multi-objective approach," Omega, Elsevier, vol. 107(C).
    3. Agra, Agostinho & Poss, Michael & Santos, Micael, 2018. "Optimizing make-to-stock policies through a robust lot-sizing model," International Journal of Production Economics, Elsevier, vol. 200(C), pages 302-310.
    4. Lu, Qihui & Chen, Xiangfeng, 2018. "Capacity expansion investment of supplier under make-to-order and make-to-stock supply chains," International Journal of Production Economics, Elsevier, vol. 198(C), pages 133-148.
    5. 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.
    6. Mohammed Hichame Benbitour & Evren Sahin, 2015. "Evaluation of the Impact of Uncertain Advance Demand Information on Production/Inventory Systems," Post-Print hal-01199290, HAL.

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