Optimal Production and Admission Policies in Make-to-Stock/Make-to-Order Manufacturing Systems

In this article, we study optimal production and admission control policies in manufacturing systems that produce two types of products: one type consists of identical items that are produced to stock, while the other has varying features and is produced to order. The model is motivated by applications from various industries, in particular, the automobile industry, where a part supplier receives orders from both an original equipment manufacturer and the aftermarket. The product for the original equipment manufacturer is produced to stock, it has higher priority, and its demands are fully accepted. The aftermarket product is produced to order, and its demands can be either accepted or rejected. We characterize the optimal production and admission policies with a partial‐linear structure, and using computational analysis, we provide insights into the benefits of the new policies. We also investigate the impact of production capacity, cost structure, and demand structure on system performance.