Complexity of Buffer Capacity Allocation Problems for Production Lines with Unreliable Machines

Buffer capacity allocation problems for flow-line manufacturing systems with unreliable machines are studied. These problems arise in a wide range of manufacturing systems and concern determining buffer capacities with respect to a given optimality criterion which can depend on the average production rate of the line, buffer cost, inventory cost, etc. Here, this problem is proven to be NP-hard for a tandem production line and oracle representation of the revenue and cost functions, and NP-hard for a series-parallel line and stepwise revenue function.     

Stochastic programming based capacity planning for semiconductor wafer fab with uncertain demand and capacity

Capacity planning is a challenging problem in semiconductor manufacturing industry due to high uncertainties both in market and manufacturing systems, short product life cycle, and expensive capital invest. To tackle this problem, this paper proposes a scenario-based stochastic programming model which considers demand and capacity uncertainties via scenarios, where the overall equipment efficiency is employed to describe the uncertain capacity for the first time. Based on the decentralized structure of tool procurement, production, stockout, and inventory decision-making processes, recourse approximation strategies are presented with varying degree of information share. The computational experiments show that the resulting tool set is robust enough to cope with the changes in capacity with the expected profits being maximized for different scenarios, and the scheme can generate pretty good solutions in reasonable computational time.     

Dynamic resource allocation in a multi-product make-to-stock production system

We consider optimal policies for a production facility in which several (K) products are made to stock in order to satisfy exogenous demand for each. The single machine version of this problem in which the facility manufactures at most one product at a time to minimise inventory costs has been much studied. We achieve a major generalisation by formulating the production problem as one involving dynamic allocation of a key resource which drives the manufacture of all products under an assumption that each additional unit of resource allocated to a product achieves a diminishing return of increased production rate. A Lagrangian relaxation of the production problem induces a decomposition into K single product problems in which the production rate may be varied but is subject to charge. These reduced problems are of interest in their own right. Under mild conditions of full indexability the Lagrangian relaxation is solved by a production policy with simple index-like structure. This in turn suggests a natural index heuristic for the original production problem which performs strongly in a numerical study. The paper discusses the importance of full indexability and makes proposals for the construction of production policies involving resource idling when it fails.     

A Genetic Algorithm for the Allocation of Buffer Storage Capacities in a Production Line with Unreliable Machines

In this paper, we consider a flow-line manufacturing system organized as a series of workstations separated by finite buffers. The failure and repair times of machines are supposed to be exponentially distributed. The production rate of each machine is deterministic, and different machines may have different production rates. The buffer allocation problem consists in determining the buffer capacities with respect to a given optimality criterion, which depends on the average production rate of the line, the buffer acquisition and installation cost, and the inventory cost. For this problem we propose a genetic algorithm where the tentative solutions are evaluated with an approximate method based on the Markov-model aggregation approach.     

Capacity planning under different inspection strategies

This paper addresses the issue of location of inspection stations along a serial production line. As a function of inspection site, the capacity required to test and repair the parts would vary. The production-inspection model developed provides management with information on such capacity planning issues. It integrates the issues of inspection location, inspection capacity, and production capacity. We consider a two-stage production line and evaluate cases when there are inspection sites after each production stage and when inspection is carried out after the final stage. In the latter case, we find the conditions when the safety stock required to meet the demand is higher. This has managerial implications because the inventory level is not only higher, it is held after the final stage, i.e. has more value added onto it. However, if there are inspection stations after each stage, the capacity required to test and repair the parts is higher. The intent of this work is to provide insights into designing production-inventory systems for the serial model that we consider. We also discuss the generalization of the scope of the two-stage model to an N stage production line. In an extension to the problem, we consider the situation when not all the defectives can be repaired. We extend the basic model by considering the effect of partial scraping of the defectives.     

Iterative algorithms for part grouping and loading in cellular reconfigurable manufacturing systems

A reconfigurable manufacturing system (RMS), one of state-of-the-art manufacturing system technologies, is the one designed at the outset for rapid changes in its hardware and software components in order to quickly adjust its production capacity and functionality in response to market or system changes. In this study, we consider a cellular RMS with multiple reconfigurable machining cells (RMCs), each of which has numerical control machines, a setup station, and an automatic material handling and storage system. Each machine within the RMC has an automatic tool changer and a tool magazine of a limited capacity. Two important operational problems, part grouping and loading, are considered in this study. Part grouping is the problem of allocating parts to RMCs, and loading is the problem of allocating operations and their cutting tools to machines within the RMC. An integer programming model is suggested to represent the two problems at the same time for the objective of balancing the workloads assigned to machines. Then, due to the complexity of the problem, we suggest two iterative algorithms in which the two problems are solved repeatedly until a solution is obtained. Computational experiments were done on various test instances and the results are reported.     

A Heuristic for a Resource-capacitated Multi-stage Lot-sizing Problem with Lead Times

In this paper we propose a heuristic for the resource-capacitated multi-stage lot-sizing problem with general product structures, set-up costs and resource usage, work-in-process inventory costs and lead times. To facilitate the functioning of the heuristic, we use the formulation of the problem based on Echelon Stock in a rolling horizon scheme. The heuristic first obtains a reasonable solution to the corresponding uncapacitated problem and then tries to attain capacity feasibility by shifting production backwards in time. The concept of echelon stock makes the task of checking the inventory feasibility of proposed shifts easier than would be the case with conventional installation stock. The heuristic is first tested computationally for problems with a five-component product structure over a 12 period planning horizon for which optimal solutions were available and for which optimality precision guarantees were also obtained via Lagrangian Relaxation. The heuristic's performance is also explored with two different 40-component product structures, with high and low set-up costs, and is compared with the Lagrangian precision guarantees.     

Discrete-time, economic lot scheduling problem on multiple, non-identical production lines

This paper deals with a general discrete time dynamic demand model to solve real time resource allocation and lot-sizing problems in a multimachine environment. In particular, the problem of apportioning item production to distinct manufacturing lines with different costs (production, setup and inventory) and capabilities is considered. Three models with different cost definitions are introduced, and a set of algorithms able to handle all the problems are developed. The computational results show that the best of the developed approaches is able to handle problems with up to 10000 binary variables outperforming general-purpose solvers and other randomized approaches. The gap between lower and upper bound procedures is within 1.0% after about 500 seconds of CPU time on a 2.66 Ghz Intel Core2 PC.     

Production variability in manufacturing systems: Bernoulli reliability case

The problem of production variability in serial manufacturing lines with unreliable machines is addressed. Bernoulli statistics of machine reliability are assumed. Three problems are considered: the problem of production variance, the problem of constant demand satisfaction, and the problem of random demand satisfaction generated by another (unreliable) production line. For all three problems, bounds on the respective variability measures are derived. These bounds show that long lines smooth out the production and reduce the variability. More precisely, these bounds state that the production variability of a line with many machines is smaller than that of a single machine system with production volume and reliability characteristics similar to those of the longer line. Since all the variability measures for a single machine line can be calculated relatively easily, these bounds provide analytical tools for analysis and design of serial production lines from the point of view of the customer demand satisfaction.     

Economic manufacturing quantity,optimum process mean,and economic specification limits setting under the rectifying inspection plan

Economic manufacturing quantity, process mean, and specification limits setting are three important methods for the inventory and quality control problems. In the imperfect production system, we usually consider the manufacturing quantity for reducing the inventory cost, determine the process level for reducing the production cost, and select the specification limits for screening the products. In this paper, we propose the above integrated model based on the application of rectifying inspection plan for obtaining maximum expected total profit of product. The asymmetric quadratic quality loss function is adopted for measuring the product quality. The sensitivity analyses of parameters are provided for illustration.     

Managing inventory and production capacity in start-up firms

We consider the problem of managing inventory and production capacity in a start-up manufacturing firm with the objective of maximising the probability of the firm surviving as well as the more common objective of maximising profit. Using Markov decision process models, we characterise and compare the form of optimal policies under the two objectives. This analysis shows the importance of coordination in the management of inventory and production capacity. The analysis also reveals that a start-up firm seeking to maximise its chance of survival will often choose to keep production capacity significantly below the profit-maximising level for a considerable time. This insight helps us to explain the seemingly cautious policies adopted by a real start-up manufacturing firm.     

On an (<Emphasis Type="Italic">s,Q</Emphasis>) Production Policy for an Integrated Inventory Model for a Single Product with Linearly Increasing Demand

We analyse an (s, Q) production policy for an inventory system consisting of a single finished product and the raw materials used for manufacturing it, and where the demand rate of the product increases linearly with time. We formulate a mathematical programming model with the objective of minimizing total inventory cost per unit time. The problem of grouping raw materials optimally so that common replenishment periods may be used is considered. Solution procedures are developed, and numerical examples are presented.     

Estimating the throughput of an exponential CONWIP assembly system

We consider a production system consisting of several fabrication lines feeding an assembly station where both fabrication and assembly lines consist of multiple machine exponential workstations and the CONWIP (CONstant Work-In-Process) mechanism is used to regulate work releases. We model this system as an assembly-like queue and develop approximations for the throughput and average number of jobs in queue. These approximations use an estimate of the time that jobs from each line spend waiting for jobs from other lines before being assembled. We use our approximations to gain insight into the related problems of capacity allocation, bottleneck placement and WIP setting.     

Managing capacity flexibility in make-to-order production environments

This paper addresses the problem of managing flexible production capacity in a make-to-order (MTO) manufacturing environment. We present a multi-period capacity management model where we distinguish between process flexibility (the ability to produce multiple products on multiple production lines) and operational flexibility (the ability to dynamically change capacity allocations among different product families over time). For operational flexibility, we consider two polices: a fixed allocation policy where the capacity allocations are fixed throughout the planning horizon and a dynamic allocation policy where the capacity allocations change from period to period. The former approach is modeled as a single-stage stochastic program and solved using a cutting-plane method. The latter approach is modeled as a multi-stage stochastic program and a sampling-based decomposition method is presented to identify a feasible policy and assess the quality of that policy. A computational experiment quantifies the benefits of operational flexibility and demonstrates that it is most beneficial when the demand and capacity are well-balanced and the demand variability is high. Additionally, our results reveal that myopic operating policies may lead a firm to adopt more process flexibility and form denser flexibility configuration chains. That is, process flexibility may be over-valued in the literature since it is assumed that a firm will operate optimally after the process flexibility decision. We also show that the value of process flexibility increases with the number of periods in the planning horizon if an optimal operating policy is employed. This result is reversed if a myopic allocation policy is adopted instead.     

The interface of buffer design and cyclic scheduling decisions in deterministic flow lines

In this paper, we address some issues on the interface of buffer design and cyclic scheduling decisions in a multi-product deterministic flow line. We demonstrate the importance of the above interface for the throughput performance of the flow line. In particular, we point out that the use of sequence-independent information, such as workload distribution and variability in processing times among stations, is not adequate to decide the optimal buffer configuration of the flow line. We formulate the buffer design problem for a fixed sequence of jobs as a general resource allocation problem, and suggest two effective heuristics for its solution. For the simultaneous buffer design and cyclic scheduling problem, we suggest an iterative scheme that builds on the effectiveness of the above heuristics. One of the side results of our extensive computational studies on this problem is that the general guidelines of buffer design in single-product flow lines with stochastic processing times are not directly transferable to the multiproduct deterministic flow line environment.     

Price markdown scheme in a multi-echelon supply chain in a high-tech industry

This paper studies the price markdown scheme in a supply chain that consists of a supplier, a contract manufacturer (CM), and a buyer (retailer). The buyer subcontracts the production of the final product to the CM. The CM buys the components from the supplier and charges the buyer a service fee for the final product produced. The price markdown is made possible by the supplier with the development of new manufacturing technologies that reduce the production cost for the sourced component. Consequently, the buyer adjusts the retail price in order to possibly stimulate stronger demand that may benefit both the supplier and the buyer. Under this scenario, we identify the optimal discount pricing strategies, capacity reservation, and the stocking policies for the supplier and the buyer. We also investigate the optimal inventory decision for the CM to cope with the price discount by considering both demand and delivery uncertainties. Our results suggest that higher production cost accelerates the effects of higher price sensitivity on lowering the optimal capacity and stocking policies in the supply chain. The effect of mean demand error on the optimal prices is relatively marginal compared with that from price sensitivity. We also found that increasing the standard deviation of the random demand does not necessarily increase the stocking level as one would predict. The results show that delivery uncertainty plays an important role in the inventory carried beyond the price break. We discuss potential extensions for future research.     

Profitability in product line pricing and composition with manufacturing commonalities

When pricing and composing a product line for optimal profitability, it is important to consider the fixed cost associated with offering each product. However, when similar products are offered, as in most product lines, manufacturing can often utilize common resources for the production of several products. In this paper, we investigate the profitability impact of including these common fixed manufacturing costs in product line pricing and composition decisions. A variable pricing product line model from research by Dobson and Kalish [Dobson, Gregory, Kalish, Shlomo, 1993. Heuristics for pricing and positioning a product-line using conjoint and cost data. Management Science 39 (2), 160–175] is integrated with manufacturing classes set forth by Morgan et al. [Morgan, Leslie Olin, Daniels, Richard L., Kouvelis, Panos, 2001. Marketing/manufacturing trade-offs in product line management. IIE Transactions 33, 949–962] to develop the new model. This new model introduces an improved method for assessing segment choice in a competitive environment of substitute products. Finally, a new solution methodology using a linear discrete reduction model is compared to two generalized genetic algorithms.     

The single-item lot-sizing problem with two production modes,inventory bounds,and periodic carbon emissions capacity

We consider the single-item lot-sizing problem with inventory bounds under a carbon emissions constraint with two options for producing items: regular or green. We wish to find the optimal production plan so that the total carbon emissions from production cannot exceed the carbon emissions capacity in each period. Extending a problem without fixed carbon emissions and inventory bounds, we show that the extended problem is polynomially solvable by a dynamic programming algorithm.     

Optimal control of a dual service rate M/M/1 production-inventory model

We analyse a dual-source, production-inventory model in which the processing times at a primary manufacturing resource and a second, contingent resource are exponentially distributed. We interpret the contingent source to be a subcontractor, although it could also be overtime production. We treat the inventory and contingent sourcing policies as decision variables in an analytical study and, additionally, allow the primary manufacturing capacity to be a decision variable in a subsequent numerical study. Our goal is to gain insight into the use of subcontracting as a contingent source of goods and whether it can fulfill real-world managers' expectations for improved performance. We prove that a stationary, non-randomised inventory and subcontracting policy is optimal for our M/M/1 dual-source model and, moreover, that a dual base-stock policy is optimal. We then derive an exact closed-form expression for one of the optimal base stocks, which to our knowledge is the first closed-form solution for a dual-source model. We use that closed-form result to advantage in a numerical study from which we gain insight into how optimal capacity, subcontracting, and inventory policies are set, and how effectively a contingent source can reduce total cost, capacity cost, and inventory cost. We find that (i) the contingent source can reduce total cost effectively even when contingent sourcing is expensive and (ii) contingent sourcing reduces capacity cost more effectively than it does inventory cost.     

Concepts for safety stock determination under stochastic demand and different types of random production yield

We consider a manufacturer’s stochastic production/inventory problem under periodic review and present methods for safety stock determination to cope with uncertainties that are caused by stochastic demand and different types of yield randomness. Following well-proven inventory control concepts for this problem type, we focus on a critical stock policy with a linear order release rule. A central parameter of this type of policy is given by the safety stock value. When non-zero manufacturing lead times are taken into account in the random yield context, it turns out that safety stocks have to be determined that vary from period to period. We present a simple approach for calculating these dynamic safety stocks for different yield models. Additionally, we suggest approaches for determining appropriate static safety stocks that are easier to apply in practice. In a simulation study we investigate the performance of the proposed safety stock variants.