Production line performance analysis within a MTS/MTO manufacturing framework: a queueing theory approach

Abstract

Paper aims: Mixing the Make-To-Stock (MTS) and Make-To-Order (MTO) strategies to benefit from the both manufacturing systems in an environment with impatient customers. Originality: This is the first research article which uses the queuing theory to find the best place of the Order Penetration Point (OPP) in a production line with impatient customers. Research method: Two scenarios are studied in this paper. 1-Semi-finished products are produced and stored in a buffer. No semi-finished product will be completed until a specific order comes to the system. This strategy leads to idle cost, but there is savings obtained in terms of eliminating investment in finished goods inventory and its holding cost. We can calculate the total cost of the system and find the optimal machine for the buffer of semi-finished products. 2-We use both MTS and MTO for completing the semi-finished products. When there is no customer in the system, semi-finished products are completed based on the MTS strategy and finished products are sent to a warehouse. But, when an order comes in for customization, a semi-finished product get assigned to that order and after finishing the current MTS job on each machine, this MTO job starts to complete the semi-finished product. To calculate system performance indexes, we use the Matrix Geometric Method (MGM) after modeling the systems with queuing theory concepts. Main findings: Numerical examples show the convexity of total cost in terms of product completion percentage and number of customization lines after the OPP. Also, increasing the production rate leads to higher expected number of semi-finished products in the buffer. Implications for theory and practice: Positioning OPP in manufacturing systems to compare different production strategies (MTS/MTO) has not been widely studied yet. This paper shows how manufacturing companies can apply the OPP to obtain benefits from both MTS and MTO strategies according to various cost parameters of the production lines. Using queuing theory concepts to model the problem under study helps to consider the external factors such as impatient customers and demand arrival uncertainty that can affect the performance measures of the system besides the internal factors such as production rate and inventory related costs. The idea of expanding the production line after a specific station and have more customization lines to improve customer satisfaction is studied in this paper as well.

Hybrid production system: perspectives in supply chain risk management

“…The hybrid system is classified as a productive system, which corresponds to the junction between MTS and MTO systems (Soman et al, 2004;Ghalehkhondabi & Suer, 2018). For Pires (2016), both MTS and MTO have specific advantages and disadvantages:…”

“…This, consequently, satisfies the MTO demand within a competitive period by keeping the overall efficiency of the production as a whole. Also, semi-finished products could be stocked for later use via MTO (Zhang et al, 2013;Ghalehkhondabi & Suer, 2018). The stock production system (MTS) consists of performing the production planning based on sales forecasting.…”

“…The hybrid system is classified as a productive system, which corresponds to the junction between MTS and MTO systems (Soman et al , 2004; Ghalehkhondabi & Suer, 2018). For Pires (2016), both MTS and MTO have specific advantages and disadvantages: For the producer, the MTS system’s main advantage is the greater potential for standardization and rationalization of production programs and production processes, with a further reduction of costs and production cycles.…”

“…For Ghalehkhondabi and Suer (2018) and Pires (2016), when a company adopts a hybrid system, the problems become more evident and complex. In this case, it becomes difficult to decide what to produce, much more because of the order than the product itself (MTS vs MTO).…”

“…Therefore, there is a mutual impact from this interaction and risk mitigation in these areas includes redundancy or flexibility to ensure SC is robust, resilient and reliable. By discussing the complementarity between SC and production, Ghalehkhondabi and Suer (2018) highlight the conflict on which requests should be met in hybrid systems (MTS–MTO). If MTO is priority, the impact on the chain is immediate regarding both what should be done to meet it and what should be left for MTS.…”