MTS lead time uncertainty study in periodic review MTS-MTO system

Joint MTS-MTO system is well recognized because a) it supports postponement well in manufacturing, and b) it can lower the cost by taking advantage of economy of scale in MTS and satisfy high product variety by taking advantage of flexibility in MTO. However, there is a lack of decision support in parameter control for fully exploiting the potential benefits. In this paper we assess the impact of the uncertainty of MTS production lead time and provide the insight of the impact of MTS production lead time and its variation. The simulation results show that with current inventory policy structure the service-related costs, such as late delivery and order rejection cost are insensitive to MTS production lead time and its variation. However, the reduction of MTS production lead time can considerably reduce inventory holding cost. Further study is needed for validating the results after an “optimal” inventory policy is obtained.