Production planning and inventory allocation of a single-product assemble-to-order system with failure-prone machines

Edwin Tai Chiu Cheng, Chunyan Gao, Houcai Shen

Research output: Journal article publicationJournal articleAcademic researchpeer-review

11 Citations (Scopus)


We consider the optimal production and inventory allocation of a single-product assemble-to-order system with multiple demand classes and lost sales. Each component is replenished by a dedicated machine that is subjected to unpredictable breakdowns. We find that the machine state not only influences the production and allocation decisions on its own component but also influences the decisions on the other components. Specifically, the optimal component production policy is a base-stock policy with the base-stock level non-decreasing in the inventory levels of the other components and the states of the other machines. The optimal component allocation policy is a rationing policy with the rationing level non-increasing in the inventory levels of the other components, the states of the other machines, and its own machine state. We use an exponential distribution to approximate the distribution of the total processing times and propose two heuristic policies to address the production and allocation decisions. The importance of taking machine failures into consideration is revealed through computational experiments.
Original languageEnglish
Pages (from-to)604-617
Number of pages14
JournalInternational Journal of Production Economics
Issue number2
Publication statusPublished - 1 Jun 2011


  • Assemble-to-order
  • Machine failure
  • Optimal control
  • Structural properties

ASJC Scopus subject areas

  • Industrial and Manufacturing Engineering
  • Business, Management and Accounting(all)
  • Management Science and Operations Research
  • Economics and Econometrics

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