Comparison of dynamic scheduling policies for hybrid make-to-order and make-to-stock production systems with stochastic demand

We examine the previously under-researched problem of scheduling a single stage, capacitated, hybrid make-to-order (MTO) and make-to-stock (MTS) production system with stochastic demand. We build on the Economic Lot Scheduling Problem (ELSP) literature and make some modifications to incorporate MTO products. At the tactical level, target cycles (kept long enough to trade-off changeover and inventory costs) are calculated while at the operational level, the general idea is to try and follow these target cycles, and make adjustments to them in order to (a) avoid stock-outs for MTS products and, (b) have short lead-time for MTO products while keeping the overall costs as low as possible. Through an extensive simulation study, we evaluate various run-out time scheduling and sequencing heuristics and provide a more complete understanding and managerial insights in the case of hybrid MTO-MTS environment with stochastic demand. It is clear that the methods that perform well for pure MTS situations do not necessarily perform well for hybrid MTO-MTS situation.