Two-level hedging point control of a manufacturing system with multiple product-types and uncertain demands

Tung Sun Chan, Z. Wang, J. Zhang, S. Wadhwa

Research output: Journal article publicationJournal articleAcademic researchpeer-review

8 Citations (Scopus)


This research is motivated by the co-operative production process of networked manufacturing systems (NMS). Manufacturing resource sharing and flexible production scheduling are two features of NMS. For an individual manufacturing system in an NMS, 'flexible production scheduling' means that it can produce multiple product-types and the switching of products is quick enough to respond to the demand fluctuation. 'Manufacturing resource sharing' means the utilisation of extra production capacity from other manufacturing systems in the NMS. Of course, that will bring extra cost. This paper focuses on the optimal production control problem of such a situation: one manufacturing system, multiple product-types, and uncertain demands. Here, it is assumed that there are two demand-levels for each product-type: the lower one and the higher one. The total normal production capacity is larger than the total lower demands and smaller than the total higher demands. If the total demands cannot be satisfied and the work-in-process (WIP) of all product-types decrease to a certain level, e.g. zero WIP, the extra production capacity may be utilised. For such a system, a new two-level hedging point policy is proposed, in which two hedging points (a higher one and a lower one) are given for each product-type. Different from the prioritised hedging point (PHP) policy which is usually applied to one-machine and multiple part-type systems, our control policy considers all part-types at the same prioritised level and keeps the work-in-process states of all product-types on a straight line in the state space. Thus, the total costs for WIP inventory and the occupation of extra capacity can be obtained in a closed form, which is a function with respect to the hedging points. Then the method for optimising the hedging points is proposed and the special structure of the optimal hedging point is obtained. Numerical experiments verify the optimality and the special structure of the hedging point obtained by our method.
Original languageEnglish
Pages (from-to)3259-3295
Number of pages37
JournalInternational Journal of Production Research
Issue number12
Publication statusPublished - 1 Jun 2008
Externally publishedYes


  • Demand uncertainty
  • Multiple product-type manufacturing system
  • Prioritised hedging point policy
  • Two-level hedging point control

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering


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