Outsourcing and production scheduling for a two-stage flow shop

In this paper we study the production scheduling problem for a two-stage flow shop in which there are options of outsourcing some operations to subcontractors. The basic objective is to look for a production schedule that can optimally utilize the resources of both the in-house production and outsourcing so that the makespan is minimized. The logistics issue between the subcontractor and the in-house shop further complicates the problem. We present models for different situations of outsourcing. For each model, we develop optimization algorithms and conduct computational experiments to study the managerial insights for the models and the algorithms.