Switching decisions in a hybrid MTS/MTO production system comprising multiple machines considering setup

A hybrid make-to-stock (MTS) and make-to-order (MTO) production system was developed and analyzed in this study using a Markov decision process (MDP) model. Previous research successfully modeled cases with and without consideration of setup to obtain optimal solutions for such systems; however, the analyzed models were limited to a single machine. Therefore, this study formulated a hybrid MTS/MTO production system comprising multiple machines using a discrete-time MDP without prioritizing either MTS or MTO. All machines were considered hybrid machines that could be switched between MTS and MTO production by incurring a setup period. The MDP model was formulated using the state space, action space of the switching decision, transition probability, and cost function. The objective was to minimize the average cost per period, which comprised the MTS inventory holding costs, MTO job backlog costs, setup costs, and lost sales costs. A series of numerical investigations was undertaken to examine the number of machines that should be switched simultaneously within a given period and evaluate the dedication of different numbers of machines to a particular process, which are unique conditions to the assumption of multiple machines. The results indicated that switching only one machine at a time in a given period was sufficient and that the average cost remained unchanged even when machines were partially dedicated to MTS and/or MTO production. Thus, the proposed switching decisions were shown to realize the efficient control of hybrid MTS/MTO production systems.