Title: Composite sourcing policy for multiple products on a single production facility

Authors: Taebok Kim, Suresh Kumar Goyal

Addresses: Graduate School of Logistics, University of Incheon, Yeonsu-Gu, Incheon 406-840, Korea. ' John Molson School of Business, Concordia University, 1455, De Maisonneuve Blvd., West, Montreal, Canada H3G1M8

Abstract: In this paper, we address the composite sourcing policy of a single production facility where customer|s order quantity can be made internally as well as externally. The surplus production capacity within a common production cycle can be utilised for in-sourcing of demand of other suppliers. We regard the traditional economics lot scheduling problem as a capacity allocation problem. Therefore, the decision problem is to determine the lot sizes as well as the composite sourcing policy for three production modes such as out-sourcing, in-sourcing and in-house making. We develop the mathematical model of the resulting decision problem and propose the solution procedure to determine the economic operating policy.

Keywords: make-or-buy decisions; outsourcing; in-sourcing; in-house manufacture; economic lot sizing; composite sourcing policies; multiple products; single production facilities; customer orders; order quantities; surplus capacity; common production cycles; lot scheduling; capacity allocation; lot sizes; logistics systems; logistics management.

DOI: 10.1504/IJLSM.2011.037420

International Journal of Logistics Systems and Management, 2011 Vol.8 No.1, pp.86 - 100

Published online: 30 Apr 2015 *

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