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Integrated Inventory Allocation and Customer Order Admission Control in a Two-stage Supply Chain with Make-to-stock and Make-to-order Facilities  

Kim, Eun-Gab (이화여자대학교 경영대학)
Publication Information
Journal of the Korean Operations Research and Management Science Society / v.35, no.1, 2010 , pp. 83-95 More about this Journal
Abstract
This paper considers a firm that operates make-to-stock and make-to-order facilities in successive stages. The make-to-stock facility produces components which are consumed by the external market demand as well as the internal make-to-order operation. The make-to-order facility processes customer orders with the option of acceptance or rejection. In this paper, we address the problem of coordinating how to allocate the capacity of the make-to-stock facility to internal and external demands and how to control incoming customer orders at the make-to-order facility so as to maximize the firm's profit subject to the system costs. To deal with this issue, we formulate the problem as a Markov decision process and characterize the structure of the optimal inventory allocation and customer order control. In a numerical experiment, we compare the performance of the optimal policy to the heuristic with static inventory allocation and admission control under different operating conditions of the system.
Keywords
Two-stage Supply Chain; Inventory Allocation; Admission Control; Coordination; Inventory Control;
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