Study on the Design of a Production System for a Combination of Made-to-Stock and Made-to-Order Products with Rush Orders

Abstract

This paper discusses the problem of designing a production system with a combination of made-to-stock (MTS) and made-to-order (MTO) products, where rush orders for MTO products cannot be regarded as being negligible. A hierarchical production planning model is formulated for a production system composed of a two-stage fabrication/assembly process. The slack capacity is set as a decision variable at a higher planning level and the investment rate of MTO products to the quantity of MTS products for the production system is set as a decision variable at a lower planning level. We analyze how the adjustment rate for production quantity will affect the unfilled-rate for MTS products and the percentage of tardy orders for MTO products as criteria for measuring manufacturing performance if the investment rate is adjusted to meet rush orders. The following points were clarified through a series of numerical experiments : (1) The higher the investment rate, the lower the percentage of tardy orders for normal MTO products ; and (2) as adjustment to the investment rate rises, the unfilled-rate for MTS products increases under a slack capacity level even if the buffer inventory for MTS products is kept at a high level. This paper presents a basis for designing a production system by setting the buffer inventory level for MTS products, the slack capacity and determining the efficiency of the adjustment rate for production quantity.