Onur Kaya and Phil Kaminsky. Inventory, Scheduling and Due-Date Decisions for Combined Make-to-Order/Make-to-Stock Supply Chains

Abstract. We consider a multi-item manufacturer served by a single supplier in a stochastic environment. The manufacturer and the supplier have to decide which items to produce to stock and which to produce to order. The manufacturer also has to quote due dates to arriving customers for make-to-order products. The manufacturer is penalized for long lead times, missing the quoted lead times and high inventory levels. We consider several variations of this problem, and design effective heuristics for the make-to-order/make-to stock decision, and to find the appropriate inventory levels for make-to-stock items. We also develop scheduling and lead time quotation algorithms for centralized and decentralized versions of the model. We perform extensive computational testing to assess the effectiveness of our algorithms, and to compare the centralized and decentralized models in order to quantify the value of centralized control in this supply chain.