Hybrid MTO/MTS production decision with stochastic demands based on FMDP

CAO Yu, WU Kan, XIONG Shouyao

Systems Engineering - Theory & Practice ›› 2018, Vol. 38 ›› Issue (4) : 899-909.

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Systems Engineering - Theory & Practice ›› 2018, Vol. 38 ›› Issue (4) : 899-909. DOI: 10.12011/1000-6788(2018)04-0899-11

Hybrid MTO/MTS production decision with stochastic demands based on FMDP

  • CAO Yu1, WU Kan1, XIONG Shouyao2
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Abstract

Considering two production modes of products which are make-to-order (MTO) and make-to-stock (MTS) and ignoring setup costs which are from production mode change and other fixed costs, this paper develop a finite Markov decision process (FMDP) model to analyse the hybrid production decision of these two products. A comparative research is done under the situation of hybrid production of MTO and MTS products in a production system with stochastic demand about the efficiency of MTO priority mode, MTS priority mode and hybrid MTO/MTS production decision based on FMDP model (FMDP mode). The results show that the number of MTO order, MTS inventory and product demand intensity are essential to the decision of FMDP mode, while remaining decision periods, penalty of unit MTO order for late delivery and the cost of handling remaining MTS production impacts are only effective in the short term. When the MTO orders or the demand intensity of MTS production is reduced, FMDP mode is better than the MTS priority mode. With respect to MTO priority mode, the same conclusion is drawn when the stock level of MTS production is reduced or the demand intensity of MTO product is lowered.

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hybrid MTO/MTS mode / FMDP mode / stochastic demand

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CAO Yu , WU Kan , XIONG Shouyao. Hybrid MTO/MTS production decision with stochastic demands based on FMDP. Systems Engineering - Theory & Practice, 2018, 38(4): 899-909 https://doi.org/10.12011/1000-6788(2018)04-0899-11

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Funding

National Natural Science Foundation of China (71573281); Research Foundation of Education Bureau of Hunan Province, China (15C0027); Central South University Innovation-drive Project (2016CX040)
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