Spring Quarter 1998

ME/IE 8773-8774

OPTIMAL ADMISSION CONTROL AND SEQUENCING
IN A MAKE-TO-STOCK/MAKE-TO-ORDER PRODUCTION SYSTEM< P> by

Izak Duenyas
Associate Professor
Department of Industrial and Operations Engineering
University of Michigan
(currently on sabbatical at Northwestern University)

Wednesday, May 20, 1998
3:35 p.m. UNITE Channel A
Room 108 Mechanical Engineering
Refreshments available in 136 Old EE after seminar

In this talk, we will address the problem of admission control and sequencing in a production system which produces two classes of products. The first class of products is made-to-stock, and the firm is contractually obliged to meet demand for this class of products. The second class of products is made-to-order and the firm has the option to accept (admit) or reject a particular order. The problem is motivated by suppliers in many industries who sign contracts with large manufacturers to supply them with a given product and also can take on additional orders from other sources on a make-to-order basis. An example from a glass supplier to the auto industry will be given.

We model the joint admission control/sequencing decision in the context of a simple two class M/M/1 queue to gain insight into the following problems:

How should a firm decide
a) when to accept or reject an additional order; and
b) which type of product to produce next?
How should a firm decide what annual quantity of orders to commit to when signing a contract to produce the make-to-stock products?
We fully characterize the structure of the optimal admission control and sequencing decisions and also show how changes in problem parameters (such as holding costs, order arrival rates, production rates) affect these decisions. Finally, we compare the performance of simple policies to the performance of the optimal policy, and explore the effects of decreases in demand or production process variability on firm profits and the optimal quantity of orders the firm would be willing to commit to.
Izak Duenyas is an associate professor in the Department of Industrial and Operations Engineering Department at the University of Michigan. His research interests are in the areas of production and inventory control, queuing theory and scheduling. He serves on the editorial boards of Operations Research, Management Science, IJFMS, IIE Transactions on Scheduling and Logistics and MSOM journals. He is the recipient of an NSF CAREER Award. Dr. Duenyas is currently on sabbatical at Northwestern University.

Informal Faculty Luncheon: Wednesday, May 20, 1998, 12:00 noon, Room 402, Campus Club. Prof. Benjaafar will be the host at today's lunch with Prof. Duenyas.