Production planning incorporating issues of reliability and backlogging with service level constraint

Abstract

To stay competitive in present-day turbulent business environment, managers of manufacturing firms must achieve crucial operational goals, such as maintaining product quality, reducing operating costs, and attaining customer satisfaction. In real manufacturing systems, allowing backordering sometimes can be an effective strategy to help smooth manufacturing schedules and lower operating costs. However, the consequence of excessive shortages is the undesirable service level which reduces customer satisfaction and goodwill. To cope with this unwanted result, a maximal permitted backlogging level is set as an operating constraint to achieve the minimum required service level. Also, production of scrap items and stochastic breakdown are both inevitable in the manufacturing processes. Motivated by addressing aforementioned issues and providing insight information to managers for supporting their operational decision makings, this paper investigates the optimal runtime for a fabrication system with backordering, service level constraint, stochastic breakdown, and scrap. Mathematical model was developed and optimization methods are used to decide the optimal runtime that minimizes total system costs. Various key insights relating to joint impacts of backlogging, service level, stochastic breakdown, and scrap on the optimal runtime decision are revealed through a numerical illustration along with sensitivity analyses.