IDEAS home Printed from https://ideas.repec.org/a/bla/popmgt/v29y2020i2p462-480.html
   My bibliography  Save this article

Production and Capacity Utilization Strategies in Supply Chains for Complex Engineered Products

Author

Listed:
  • Ashesh Kumar Sinha
  • Ananth Krishnamurthy

Abstract

We analyze production and capacity utilization strategies in a supply chain where individual components can be made either at a shared in‐house manufacturing facility or at dedicated facilities of external subcontractors. The manufacturer and the subcontractor differ in terms of costs, production capacities, rates, and service level capabilities. Using Markov decision process models, we determine the optimal policy and characterize its structure. We derive the set of conditions that partitions the state space into regions and characterize optimal policies in each region. We derive optimal policies for manufacturer and subcontractors under different settings and show that the optimal policy has a multi‐index structure in some settings.

Suggested Citation

  • Ashesh Kumar Sinha & Ananth Krishnamurthy, 2020. "Production and Capacity Utilization Strategies in Supply Chains for Complex Engineered Products," Production and Operations Management, Production and Operations Management Society, vol. 29(2), pages 462-480, February.
  • Handle: RePEc:bla:popmgt:v:29:y:2020:i:2:p:462-480
    DOI: 10.1111/poms.13125
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/poms.13125
    Download Restriction: no

    File URL: https://libkey.io/10.1111/poms.13125?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Li Li & Li Jiang, 2018. "Horizontal Subcontracting From Competitors: When and What?," Production and Operations Management, Production and Operations Management Society, vol. 27(7), pages 1320-1333, July.
    2. Bin Hu & Saif Benjaafar, 2009. "Partitioning of Servers in Queueing Systems During Rush Hour," Manufacturing & Service Operations Management, INFORMS, vol. 11(3), pages 416-428, October.
    3. Saif Benjaafar & Mohsen ElHafsi & Francis de Véricourt, 2004. "Demand Allocation in Multiple-Product, Multiple-Facility, Make-to-Stock Systems," Management Science, INFORMS, vol. 50(10), pages 1431-1448, October.
    4. Bradley, James R., 2005. "Optimal control of a dual service rate M/M/1 production-inventory model," European Journal of Operational Research, Elsevier, vol. 161(3), pages 812-837, March.
    5. Itay Gurvich & Mor Armony & Avishai Mandelbaum, 2008. "Service-Level Differentiation in Call Centers with Fully Flexible Servers," Management Science, INFORMS, vol. 54(2), pages 279-294, February.
    6. Ashesh Kumar Sinha & Thomas Davich & Ananth Krishnamurthy, 2016. "Optimisation of production and subcontracting strategies," International Journal of Production Research, Taylor & Francis Journals, vol. 54(8), pages 2377-2393, April.
    7. Senthil Veeraraghavan & Alan Scheller-Wolf, 2008. "Now or Later: A Simple Policy for Effective Dual Sourcing in Capacitated Systems," Operations Research, INFORMS, vol. 56(4), pages 850-864, August.
    8. Anand Paul & Yinliang (Ricky) Tan & Asoo J. Vakharia, 2015. "Inventory Planning for a Modular Product Family," Production and Operations Management, Production and Operations Management Society, vol. 24(7), pages 1033-1053, July.
    9. Ashesh Kumar Sinha & Ananth Krishnamurthy, 2016. "Dual index production and subcontracting policies for assemble-to-order systems," IISE Transactions, Taylor & Francis Journals, vol. 48(5), pages 415-427, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Svoboda, Josef & Minner, Stefan & Yao, Man, 2021. "Typology and literature review on multiple supplier inventory control models," European Journal of Operational Research, Elsevier, vol. 293(1), pages 1-23.
    2. Gad Allon & Jan A. Van Mieghem, 2010. "Global Dual Sourcing: Tailored Base-Surge Allocation to Near- and Offshore Production," Management Science, INFORMS, vol. 56(1), pages 110-124, January.
    3. Eric Logan Huggins & Tava Lennon Olsen, 2010. "Inventory Control with Generalized Expediting," Operations Research, INFORMS, vol. 58(5), pages 1414-1426, October.
    4. Amy R. Ward & Mor Armony, 2013. "Blind Fair Routing in Large-Scale Service Systems with Heterogeneous Customers and Servers," Operations Research, INFORMS, vol. 61(1), pages 228-243, February.
    5. Laurent Lim, Lâm & Alpan, Gülgün & Penz, Bernard, 2014. "Reconciling sales and operations management with distant suppliers in the automotive industry: A simulation approach," International Journal of Production Economics, Elsevier, vol. 151(C), pages 20-36.
    6. Işık Biçer & Florian Lücker & Tamer Boyacı, 2022. "Beyond Retail Stores: Managing Product Proliferation along the Supply Chain," Production and Operations Management, Production and Operations Management Society, vol. 31(3), pages 1135-1156, March.
    7. Arts, Joachim & Kiesmüller, Gudrun P., 2013. "Analysis of a two-echelon inventory system with two supply modes," European Journal of Operational Research, Elsevier, vol. 225(2), pages 263-272.
    8. Yanyi Xu & Doğan A. Serel & Arnab Bisi & Maqbool Dada, 2022. "Coping with Demand Uncertainty: The Interplay between Dual Sourcing and Endogenous Partial Backordering," Production and Operations Management, Production and Operations Management Society, vol. 31(4), pages 1560-1575, April.
    9. Achal Bassamboo & Assaf Zeevi, 2009. "On a Data-Driven Method for Staffing Large Call Centers," Operations Research, INFORMS, vol. 57(3), pages 714-726, June.
    10. Arbabian, Mohammad E. & Wagner, Michael R., 2020. "The impact of 3D printing on manufacturer–retailer supply chains," European Journal of Operational Research, Elsevier, vol. 285(2), pages 538-552.
    11. Na Liu & Pui-Sze Chow & Hongshan Zhao, 2020. "Challenges and critical successful factors for apparel mass customization operations: recent development and case study," Annals of Operations Research, Springer, vol. 291(1), pages 531-563, August.
    12. Huang, Boray & Wu, Andy, 2017. "Reduce shortage with self-reservation policy for a manufacturer paying both fixed and variable stockout expenditure," European Journal of Operational Research, Elsevier, vol. 262(3), pages 944-953.
    13. Ali, Agha Iqbal & O'Connor, Debra J., 2010. "The impact of distribution system characteristics on computational tractability," European Journal of Operational Research, Elsevier, vol. 200(2), pages 323-333, January.
    14. N. Knofius & M. C. Heijden & A. Sleptchenko & W. H. M. Zijm, 2021. "Improving effectiveness of spare parts supply by additive manufacturing as dual sourcing option," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 43(1), pages 189-221, March.
    15. Amir Rastpour & Armann Ingolfsson & Bora Kolfal, 2020. "Modeling Yellow and Red Alert Durations for Ambulance Systems," Production and Operations Management, Production and Operations Management Society, vol. 29(8), pages 1972-1991, August.
    16. Bram Westerweel & Rob Basten & Jelmar den Boer & Geert‐Jan van Houtum, 2021. "Printing Spare Parts at Remote Locations: Fulfilling the Promise of Additive Manufacturing," Production and Operations Management, Production and Operations Management Society, vol. 30(6), pages 1615-1632, June.
    17. Reimann, Marc, 2011. "Speculative production and anticipative reservation of reactive capacity by a multi-product newsvendor," European Journal of Operational Research, Elsevier, vol. 211(1), pages 35-46, May.
    18. Vladimir Kovtun & Avi Giloni & Clifford Hurvich & Sridhar Seshadri, 2023. "Pivot Clustering to Minimize Error in Forecasting Aggregated Demand Streams Each Following an Autoregressive Moving Average Model," Stats, MDPI, vol. 6(4), pages 1-28, November.
    19. Gregory Dobson & Tolga Tezcan & Vera Tilson, 2013. "Optimal Workflow Decisions for Investigators in Systems with Interruptions," Management Science, INFORMS, vol. 59(5), pages 1125-1141, May.
    20. Işık Biçer, & Florian Lücker, & Tamer Boyaci,, 2019. "Beyond retail stores: Managing product proliferation along the supply chain," ESMT Research Working Papers ESMT-19-02_R2, ESMT European School of Management and Technology, revised 16 Mar 2021.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:popmgt:v:29:y:2020:i:2:p:462-480. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1937-5956 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.