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Flexible lot sizing in hybrid make-to-order/make-to-stock production planning

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  • Beemsterboer, Bart
  • Land, Martin
  • Teunter, Ruud

Abstract

Hybrid make-to-order/make-to-stock production systems are difficult to control. Batch production of make-to-stock products allows for efficient capacity usage, but fixed batch sizes can make the system less responsive to make-to-order customers. Using Markov Decision Process modeling, we show that the optimal policy for such hybrid systems varies the lot size in response to make-to-order backlogs as well as stock levels. We evaluate the performance of this flexible lot sizing policy for a two-product hybrid system. We find that it leads to savings of up to 23% compared to policies that use either completely or partly fixed lot sizes. We also find that flexible lot sizing is especially beneficial for systems with a low load and where make-to-stock is important in terms of production capacity usage and cost.

Suggested Citation

  • Beemsterboer, Bart & Land, Martin & Teunter, Ruud, 2017. "Flexible lot sizing in hybrid make-to-order/make-to-stock production planning," European Journal of Operational Research, Elsevier, vol. 260(3), pages 1014-1023.
    • Handle: RePEc:eee:ejores:v:260:y:2017:i:3:p:1014-1023
    DOI: 10.1016/j.ejor.2017.01.015
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    References listed on IDEAS

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    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. Modak, Nikunja Mohan & Kelle, Peter, 2019. "Managing a dual-channel supply chain under price and delivery-time dependent stochastic demand," European Journal of Operational Research, Elsevier, vol. 272(1), pages 147-161.
    4. 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.
    5. Dieter Fiems & Eline De Cuypere & Koen De Turck & Dieter Claeys, 2020. "Performance Analysis of Hybrid MTS/MTO Systems with Stochastic Demand and Production," Mathematics, MDPI, vol. 8(11), pages 1-16, November.
    6. Mashud, Abu Hashan Md & Chakrabortty, Ripon K. & Hussain, Omar K. & Choi, Tsan-Ming, 2024. "Reducing emissions from production and distribution in three-echelon supply chains," International Journal of Production Economics, Elsevier, vol. 271(C).
    7. Sato, Yutaro & Maeda, Hiroyuki & Toshima, Ryusei & Nagasawa, Keisuke & Morikawa, Katsumi & Takahashi, Katsuhiko, 2023. "Switching decisions in a hybrid MTS/MTO production system comprising multiple machines considering setup," International Journal of Production Economics, Elsevier, vol. 263(C).

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