Managing Simple re-entrant Flow Lines: Theoretical Foundation and Experimental Results

We address several aspects related to managing re-entrant lines in a unified manner – capacity allocation, inventory management and production control. Our approach to study these systems is through simulation based optimization. Simulation offers the flexibility to model the complexities adequately while the gradient computation (via Infinitesimal Perturbation Analysis (IPA)) helps identify good solutions quickly. Our framework is a discrete time capacitated multiple product production-inventory system operating under a base stock policy. We analyze several different production and capacity allocation rules. We develop expressions for and validate the appropriate derivatives. These derivatives can then be used in an optimization tool which enables the determination of optimal parameters for the several policies proposed. We also present a summary of insights obtained through an extensive computational study.