An Environmental Hedging Point Policy to control production rate and emissions in unreliable manufacturing systems

Abstract

This paper proposes a new Hedging Point Policy (HPP) which integrates environmental concerns into the optimal control of unreliable manufacturing systems. The considered system is composed of a production facility subjects to random failures and producing a product family intended for a given market with stable demand. The manufacturing facility’s operations cause harmful emissions to the environment, and may incur sanctions in the form of an environmental tax imposed by the relevant authorities. Given the significant compromise that must take place between inventory, backlog and taxes costs, the main objective of this paper is to propose a feedback adaptive control policy which provides a better control of the production rate and the emissions generated. Under the HPP category, a new structure called the Environmental Hedging Point Policy (EHPP) is proposed. To illustrate the effectiveness of the proposal, an experimental approach based on simulation modelling, variance analysis and response surface methodology (RSM) is applied. The results show a significant gain in terms of incurred costs compared to those incurred when the system is governed by a classical HPP. An improved version of EHPP is also proposed for systems with high emission rates. Several sensitivity analyses are conducted to illustrate the robustness and effectiveness of the proposed policies.