The paper describes a simulation model of production engineering for custom and small-batch production. The described simulation model includes three levels: control over the operation of separate elements of the production system and their interaction, planning and modeling of various variants of a processing route, selection of rational cutting parameters, and constraints analysis of the production system. In order to determine the rational cutting modes, total accuracy of processing is calculated and Taguchi method is applied. A rational variant of the production process is selected by multiple criteria analysis.