Deux Chemicals Inc. Goes Just-in-Time

Deux Chemicals Inc. (a pseudonym) decided to offer its customers reliable just-in-time delivery to reduce the customers' need to hold chemicals that are difficult and expensive to store. Although its manufacturing facilities are reliable, they occasionally require unscheduled repairs that could take up to three weeks to complete. To ensure reliable supply to its customers, Deux Chemicals holds safety stock; however, it needed to determine how much additional storage capacity it would require to support its just-in-time promise. We present a methodology to determine safety-stock levels and storage capacity requirements to achieve high levels of customer service, and a production control policy that helps to minimize safety stock and storage needs. The methodology enabled Deux Chemicals to identify an economical strategy for safety stock and its storage that will allow the company to significantly reduce its risk of shortages.

[1]  Michael H. Rothkopf,et al.  Reliability and Inventory in a Production-Storage System , 1979 .

[2]  M. Parlar,et al.  Future supply uncertainty in EOQ models , 1991 .

[3]  Esmail Mohebbi,et al.  Supply interruptions in a lost-sales inventory system with random lead time , 2003, Comput. Oper. Res..

[4]  N. E. Abboud.  A discrete-time Markov production-inventory model with machine breakdowns , 2001 .

[5]  Mahmut Parlar,et al.  An Inventory Problem with Two Randomly Available Suppliers , 1997, Oper. Res..

[6]  Ali Akgunduz,et al.  A comparative study of heuristic algorithms on Economic Lot Scheduling Problem , 2008, Comput. Ind. Eng..

[7]  T. Morton,et al.  A periodic review, production planning model with uncertain capacity and uncertain demand—optimality of extended myopic policies , 1994 .

[8]  Ramesh Bollapragada,et al.  Single-Stage Resource Allocation and Economic Lot Scheduling on Multiple, Nonidentical Production Lines , 1999 .

[9]  Kamran Moinzadeh,et al.  Analysis of a production/inventory system subject to random disruptions , 1997 .

[10]  Ram Akella,et al.  Optimal control of production rate in a failure prone manufacturing system , 1985 .

[11]  Anis Gharbi,et al.  Age-dependent production planning and maintenance strategies in unreliable manufacturing systems with lost sale , 2007, Eur. J. Oper. Res..

[12]  M. Parlar,et al.  A periodic review inventory model with Markovian supply availability , 1995 .

[13]  Stanley B. Gershwin,et al.  An algorithm for the computer control of a flexible manufacturing system , 1983 .

[14]  P. R. Parthasarathy,et al.  On the unutilized capacity of a production-storage system , 1987 .

[15]  Ioannis Ch. Paschalidis,et al.  Probabilistic Service Level Guarantees in Make-to-Stock Manufacturing Systems , 2001, Oper. Res..

[16]  A. Sharifnia,et al.  Production control of a manufacturing system with multiple machine states , 1988 .

[17]  Christos Koulamas.  Single‐Stage and Serial Production Line Systems with Unreliable Machines and General Probability Distributions , 1993 .

[18]  Lawrence V. Snyder,et al.  Infinite-Horizon Models for Inventory Control under Yield Uncertainty and Disruptions , 2010 .

[19]  Ali Gharbi,et al.  Optimal production control problem in stochastic multiple-product multiple-machine manufacturing systems , 2003 .

[20]  Morton J. M. Posner,et al.  Production-Inventory Systems with Unreliable Machines , 1994, Oper. Res..

[21]  Yigal Gerchak,et al.  Coordination in decentralized assembly systems with uncertain component yields , 2007, Eur. J. Oper. Res..

[22]  Rayadurgam Srikant,et al.  Scheduling multiple part-types in an unreliable single machine manufacturing system , 1995, Proceedings of 1995 American Control Conference - ACC'95.

[23]  Panganamala Ramana Kumar,et al.  Optimality of Zero-Inventory Policies for Unreliable Manufacturing Systems , 1988, Oper. Res..

[24]  Wallace J. Hopp,et al.  Optimal inventory control in a production flow system with failures , 1989 .

[25]  Hau L. Lee,et al.  Lot Sizing with Random Yields: A Review , 1995, Oper. Res..

[26]  M. J. M. Posner,et al.  Analysis of a production-inventory system with unreliable production facility , 1989 .

[27]  D. Mitra.  Stochastic theory of a fluid model of producers and consumers coupled by a buffer , 1988, Advances in Applied Probability.

[28]  Ali Gharbi,et al.  Optimal safety stocks and preventive maintenance periods in unreliable manufacturing systems , 2007 .