Configuration design for make-to-order production considering individual order arrivals and machine level changeovers

This paper is on the configuration design for mixed-model, make-to-order (MTO) production, simultaneously considering the arrivals of individual demands and machine level changeover. A simple analytical model is developed for comparing the revenues of flexible and dedicated configurations in a mixed model production system. Using the analytical model, the condition under which one configuration is preferred over another is derived, and the effect of various model parameters on the condition is examined. The flexible configuration is preferred with lower changeover cost, higher idle cost, and higher similarity in the order arrival rates for different product types. The analysis of a scenario for lead-time based pricing reveals that lower changeover time of flexible machines favors the flexible configuration. It was also shown that the number of machines affects the preference between the flexible and dedicated configurations, positively or negatively depending on the values of other parameters. Flexible configurations are less favored when the order arrivals of different product types are highly correlated, since due to the need of constant changeovers.