Capacity and backlog management in queuing-based supply chains

In this paper, we model and analyze a type of two-stage serial supply chain often found in service sector and make-to-order manufacturing industries. The chain holds no finished goods inventory at either stage. Rather, processing occurs only after an order is received and backlogs are managed solely by adjusting capacity. We model this supply chain using a tandem queuing model. Our analysis considers the impact of changes in first stage lead-time and capacity adjustment time on backlog, waiting time, and capacity variances at both stages. The results can be used to support the argument for better coordination across stages in these types of supply chains.