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

Klaus Altendorfer, Stefan Minner

Research output: Contribution to journalArticlepeer-review

22 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)197-212
Number of pages16
JournalIISE TRANSACTIONS
Volume46
Issue number3
DOIs
Publication statusPublished - 4 Mar 2014

Keywords

  • make-to-order
  • make-to-stock
  • manufacturing system control
  • Manufacturing system design
  • multi-product production system
  • queuing
  • variable due dates

Fingerprint Dive into the research topics of 'A comparison of make-to-stock and make-to-order in multi-product manufacturing systems with variable due dates'. Together they form a unique fingerprint.

Cite this