Production control and stock rationing for a make-to-stock system with parallel production channels

Abstract

This article considers the problem of production control and stock rationing in a make-to-stock production system with lost sales, multiple servers in parallel production channels, and several customer classes. It is assumed that independent stationary Poisson demand streams and exponential service times are in operation. At decision epochs, the control specifies whether or not to increase the number of active servers in conjunction with the stock allocation decision. Previously placed production orders cannot be cancelled. The system is modeled as an M/M/s make-to-stock queue, and properties of the optimal cost function and of the optimal production and rationing policies are characterized. It is shown that the optimal production policy is a state-dependent base-stock policy, and the optimal rationing policy is of threshold type. Furthermore, it is shown that the rationing levels are non-increasing in the number of active channels. It is also shown that the optimal ordering policy transforms into a bang-bang type policy when the model is relaxed by allowing order cancellations. Another model with partial order-cancellation flexibility is provided to fill the gap between the no-flexibility and the full-flexibility models. The additional gain that the optimal policy provides over the suboptimal base-stock policy proposed in the literature is qualified along with the value of the flexibility to cancel production orders.