Optimal common manufacturing cycle length for a multi-product inventory system with rework and an outside contractor

Abstract

Facing global market’s rigid competition, today’s manufacturers need not only to satisfy the timely demands of multiproduct, but also to ensure quality of their goods. For the purpose of reducing fabrication cycle time so as to meet timely demands, outsourcing is always a helpful option in production planning. To address the aforementioned real issues, the present study derives the optimal common manufacturing cycle length for a multi-product inventory system, wherein a part of lot-size of each end product is supplied by an outside contractor, and in each cycle a rework process repairs random defects produced by the in-house process. The schedule of receipt time for outsourced items is practically assumed to be in the end of rework. A specific decision model is built to cautiously portray such a hybrid inventory problem. Through modeling, analysis, and derivation the expected annual system cost is obtained, and using optimization technique the optimal cycle length that minimizes system cost is gained. The proposed decision model not only can help find optimal solution to the problem, but also enables manufacturers to obtain diverse essential information, such as the critical outsourcing rate, individual manufacturing related cost for each end product, and influence or joint effects of variations in different system factor(s) on the problem. Without our in-depth exploration, the aforementioned information will still be unavailable to support managerial decision makings.