Cost Minimization for a Multi-Product Fabrication-Distribution Problem with Commonality, Postponement, and Quality Assurance

Singa Chiu,Jyun-Sian Kuo,Victoria Chiu,Yuan-Shyi Chiu

doi:10.3390/mca21030038

Abstract

To gain more competitive advantages and attract more customers from the turbulent business environment, manufacturing firms today must offer a wide variety of products to marketplaces. The existence of component commonality in multi-product fabrication planning enables managers to reevaluate different production design alternatives to lower overall production relevant costs. Motivated by assisting managers of manufacturing firms in gaining competitive advantages, maximizing machine utilization, and reducing overall quality and fabrication-distribution costs, this study explores a multi-product fabrication-distribution problem with component commonality, postponement, and quality assurance. A two-stage single-machine production scheme with the reworking of repairable nonconforming items is proposed. The first stage fabricates common intermediate components for all products, and the second stage produces and distributes end products under a common cycle time policy. Mathematical modeling and optimization techniques are utilized to derive the optimal fabrication-distribution policy that minimizes the expected total system costs of the problem. Finally, we provide a numerical example with sensitivity analyses to not only show practical uses of the obtained results, but also demonstrate that the proposed production scheme is beneficial in terms of cost savings and cycle time reduction as compared to that in a single-stage production scheme. The research results enable manufacturers to gain more competitive advantages in the turbulent global business environment.

Highlights

Maximizing machine utilization and minimizing overall production and distribution costs are two important operation goals for most of manufacturing firms
To achieve maximum machine utilization, multiple products are usually fabricated in succession on a single machine
Inspired by the potential advantages of postponement strategy and reflection of the real-world vendor-buyer integrated systems, this study explores a multi-product fabrication-distribution problem with component commonality, postponement strategy, and quality assurances using a single machine production scheme

Summary

Introduction

Maximizing machine utilization and minimizing overall production and distribution costs are two important operation goals for most of manufacturing firms. Zipkin [3] examined a production system that fabricates multiple products in large and discrete batches, and both demands and production process were stochastic He combined standard inventory and queuing sub-models into classic optimization problems, and applied simple and plausible control policies to minimize the approximate system operating cost. To reflect real vendor-buyer integrated systems, their study considered a production planning of m products in turn on a single machine, potential production and reworking of nonconforming items, and a multi-delivery policy for end products They used mathematical modeling with the renewal reward theorem to derive the closed-form optimal operating policies to the problem, and demonstrated practical use of their results by using a numerical example and sensitivity analysis. Inspired by the potential advantages of postponement strategy and reflection of the real-world vendor-buyer integrated systems, this study explores a multi-product fabrication-distribution problem with component commonality, postponement strategy, and quality assurances using a single machine production scheme. Little attention has been paid to the combined realistic situations for such specific multi-product fabrication-distribution decision-making; the present study is intended to bridge the gap

Problem Description and Modeling

Formulations

Results

Numerical Applications