A Dynamic Switching Policy with Thresholds of Inventory Level and Waiting Orders for MTS/MTO Hybrid Production Systems

Abstract

Dynamic MTS/MTO hybrid systems consist of the both production streams of make-to-stock (MTS) and make-to-order (MTO) in common facility. In this system, there is a subset of machines, called “hybrid machines,” which can be switched between MTS and MTO productions flexibly depending on the situation. For the systems, Zhang et al. (2013) proposed a policy to switch all of hybrid machines between MTS and MTO production with two thresholds of inventory level, and they analysed the performance of the switching policy numerically. However, MTO waiting customers could not be reduced by the proposed switching policy because it used only inventory level for deciding the switch of hybrid machines. Based on the background, this paper proposes a dynamic switching policy with thresholds not only of inventory level of MTS product but also of waiting orders of MTO product. A Markov process model is developed for the proposed policy, and a heuristic search algorithm is proposed for obtaining Pareto solutions. The performance of the expected operating cost and the average waiting orders is analysed and compared with that of the previous policy, and the results show that the proposed policy is superior to the previous policy especially when the operating cost is requested to be suppressed under the severe requirements for the out-of-stock cost of MTS products.