Subcontracting price schemes for order acceptance and scheduling

In this paper we study subcontracting price schemes between a subcontractor and a firm that are engaged in subcontracting of heterogeneous orders with distinct due dates, revenues, and processing times. We assume that the subcontractor proposes the subcontracting pricing and the firm follows by determining the subcontracted orders by solving its order acceptance and scheduling problem. When the subcontractor adopts a linear pricing scheme, we find the firm׳s optimal decisions and develop an algorithm to derive the subcontractor׳s own optimal pricing. We then design a fixed pricing with transfer payment scheme and a quantity discount pricing scheme to coordinate the firm׳s and subcontractor׳s decisions. We examine if the subcontractor can make a higher profit using either of these schemes than the linear pricing scheme, and if they will induce the firm to make decisions that lead to system-wide optimal outcomes.     

An Evaluation of Capacity Sensitive Order Review and Release Procedures in Job Shops

We investigate the performance of capacity-sensitive order review and release (ORR) procedures in job shop environments that have not been previously explored. Previous research has ignored the case of job shops which must perform to very tight due-dates because of time-sensitive customers. We propose and test a new capacity sensitive ORR procedure called path based bottleneck (PBB) in such environments, along with the modified infinite loading (MIL) procedure which has been shown to work well in several studies. We compare the performance of these two controlled release rules with that of immediate release rule under different conditions of capacity utilization and customer specified exogenous duedates. Our results indicate that PBB performs well in lowering total costs when due-dates are tight, while MIL is a better procedure with relatively loose to medium due-dates. We also show that in many cases, the shortest processing time (SPT) dispatching rule is a superior performer than a due-date based rule like critical ratio (CR); a conclusion which is contrary to the existing research in this area. In addition, the shop floor control policies recommended are shown to be sensitive to the cost structure of the firm. The managerial implications of this research in providing effective shop floor control in job shops operating under tight due-date conditions are also discussed.     

Determining overtime policies for a repair shop

Problems arise when a repair shop with a fixed capacity has to cope with fluctuations in the arrivals of failed assemblies. The effective use of priority scheduling rules and labor assignment rules will enable the repair shop to work efficiently but only to the extent of the repair capacity of the shop. Increasing the number of spares in stock to accommodate these short-term fluctuations would be costly in the long run. In order to maintain a certain level of service, the repair shop often needs to resort to overtime. This paper examines various overtime policies, namely, proactive and reactive overtime policies, under various failure distributions and budget constraints for spares. The findings show that reactive overtime policies generally perform better than proactive overtime policies under the conditions tested. Benefit-cost ratio curves are developed for these overtime policies which illustrate the stochastic interaction effects of the priority scheduling rule, spares budget, and failure arrival distribution.     

Heterogeneous dispatching rules in job and flow shops

This paper reports the results of a study of the use of heterogeneous dispatching rules for the scheduling of work in a job shop. The methodology employed included discrete event simulation, using rule combinations determined by prior genetic algorithm searches and generalization using neural networks. Eight dispatching rules were considered, including first in first out (FIFO), earliest due date ( EDD), shortest processing time (SPT), slack/ number of operations (SLK), critical ratio (CR), modified due date (MDD), modified operation due date (MOD), and apparent tardiness cost (ATC). A three-machine job shop was studied, in which three work organizations were employed, pure flow (fixed sequence), pure job shop ( random sequence), and a hybrid shop where flow is random but with unequal probabilities. Three levels of machine loading were used and average tardiness was used as the performance measure. In most cases, modified due date and apparent tardiness cost were the best rules. The application of the best rules effected the results primarily when applied to bottleneck machines or the first machine in a pure flow shop. Nearly any other rule was acceptable on non-botdeneck machines except FIFO and CR, which consistently perform poorly. No major advantage of mixing rules was found.     

Overtime usage in a job shop environment

Problems are encountered in a job shop which has a fixed capacity if the total work content of the jobs passing through the shop increases sufficiently. Even the use of effective priority dispatching rules and/or expediting does not adequately shorten the queues which develop if the total work content continually exceeds shop capacity. To avoid losing job orders because the orders are unduly delayed, the job shop might resort to overtime usage. This study examines the efficient and economic use of overtime to relieve the backlog problem and uses overtime as the basic criterion for evaluation of overtime usage. The study employs GPSS V programming language to simulate a hypothetical job shop. The shop is loaded to various proportions of its normal capacity and various levels of overtime are tested. Findings show that overtime should not be assigned indiscriminately but rather should be based on a shop's unique conditions of overtime cost, the priority rule being employed, and the level of capacity utilization. Marginal benefit-cost ratio curves are developed to determine whether overtime usage is economically reasonable. These curves may also be used to determine the maximum or limiting amount of overtime to use under specific shop conditions.     

THE IMPACT OF SIMPLE PRIORITY RULE COMBINATIONS ON DELIVERY SPEED AND DELIVERY RELIABILITY IN A HYBRID SHOP

This study examines the effects of using different priority rules at different stages of a multistage, flow-dominant shop. A simulation model is constructed of a manufacturing system comprised of three stages: gateway, intcrmcdiatc, and finishing. As is typical of a flow-dominant shop, the overall flow of the simulated system (gateway to intermediate to finishing) is consistent with a flow shop, but processing in the intermediate stage involves multiple work centers and resembles a job shop. Shop performance is observed when four well-known priority heuristics are applied in different combinations in the gateway, intermediate, and finishing stages of the process. Multiple performance measures addressing the strategic objectives of delivery speed and delivery reliability are recorded under two different shop load conditions. Results show that the measures of both delivery speed and delivery reliability are affected by the priority rule combinations, and that a tradeoff exists between average performance and consistency of performance. Certain priority rule combinations affect performance in predictable ways, allowing the user to assess tradeoffs between delivery speed and delivery reliability.     

Application of the Net Present Value Criterion in Random and Flow Shop Scheduling*

While the majority of the literature on shop scheduling has emphasized time-based performance criteria such as mean flow time, lateness, and tardiness, the primary goal of management should be the maximization of shop profitability. In this research the net present value (NPV) criterion is introduced to measure shop profitability. This measure combines aspects of job flow time and inventory holding costs into a single measure. A simulation model of a job shop is used to examine the performance of a variety of time- and value-based scheduling rules. These rules are evaluated with respect to the NPV criterion in both random and flow shop environments. The results suggest that priority rules that utilize monetary information about jobs yield a higher NPV than many time-based rules in most situations, with little sacrifice in job tardiness. A well-researched time-based rule, critical ratio, also provides excellent performance when the shop is heavily loaded.     

Concerning Workload Control and Order Release: The Pre‐Shop Pool Sequencing Decision

Every production planning concept that incorporates controlled order release will initially withhold jobs from the shop floor and create a pre‐shop pool. Order release is a key component of the Workload Control concept that aims to maintain work‐in‐process within limits while ensuring due dates are met. Order release includes two decisions: (i) a sequencing decision that establishes the order in which jobs are considered for release; and, (ii) a selection decision that determines the criteria for choosing jobs for release. While selection has received much research attention, sequencing has been largely neglected. Using simulation, this study uncovers the potential for performance improvement in the sequencing decision and improves our understanding of how order release methods should be designed. Although most prior studies apply time‐oriented sequencing rules and load‐oriented selection rules, analysis reveals that load balancing considerations should also be incorporated in the sequencing decision. But an exclusive focus on load balancing is shown to increase mean tardiness and, paradoxically, require high workloads. A new sequencing rule is developed that only balances loads when multiple orders become urgent. It avoids high mean tardiness and allows the shop to operate at a low workload level. At the same time, the percentage tardy is reduced by up to 50% compared to a purely time‐oriented rule. The findings have implications not only for Workload Control but for any concept that features order release control, such as ConWIP and Drum‐Buffer‐Rope.     

A hybrid knowledge discovery model using decision tree and neural network for selecting dispatching rules of a semiconductor final testing factory

One of the most challenging production decisions in the semiconductor testing industry is to select the most appropriate dispatching rule which can be employed on the shop floor to achieve high manufacturing performance against a changing environment. Job dispatching in the semiconductor final testing industry is severely constrained by many resources conflicts and has to fulfil a changing performance required by customers and plant managers. In this study we have developed a hybrid knowledge discovery model, using a combination of a decision tree and a back-propagation neural network, to determine an appropriate dispatching rule using production data with noise information, and to predict its performance. We built an object-oriented simulation model to mimic shop floor activities of a semiconductor testing plant and collected system status and resultant performances of several typical dispatching rules, earliest-due-date (EDD) rule, first-come-first-served rule, and a practical dispatching heuristic taking set-up reduction into consideration. Performances such as work-in-process, set-up overhead, completion time, and tardiness are examined. Experiments have shown that the proposed decision tree found the most suitable dispatching rule given a specific performance measure and system status, and the back propagation neural network then predicted precisely the performance of the selected rule.     

A comparative study of some priority dispatching rules under different shop loads

Priority dispatching rules and shop load affect job-shop performance. This paper evaluates ten different priority dispatching rules with respect to six different performance criteria under light, medium and heavy shop loads. Simulation was used as a tool to determine the rankings of the dispatching rules for a given shop load and performance criteria. A comparative study was conducted to investigate the performance of these rules. Two rules, ‘shortest processing time” and ‘least work remaining’, performed well under criteria related to the processing time. It was found that the rules that perform well in average and r.m.s. tardiness perform poorly under percentage-of-jobs-late criterion. The experimental results are conveyed with critical comments on the performance of the dispatching rules under different loading conditions of the shop.     

Single machine scheduling problems with subcontracting options

In this paper, we study a scheduling model as follows: there are n jobs which can be processed in house on a single machine or subcontracted to a subcontractor. If a job is subcontracted, its processing cost is different from the in-house cost and its delivery lead time is a stepwise function of the total processing time of outsourced jobs. Two objective functions are studied (1) to minimize the weighted sum of the maximal completion time and the total processing cost and (2) to minimize the weighted sum of the number of tardy jobs and the total processing cost. For the first problem, we prove that it is NP-hard and get a pseudo-polynomial time algorithm. For the second problem, we prove that it is NP-hard and get a pseudo-polynomial time algorithm for a special case.     

IMPROVING JOB SHOP PERFORMANCE THROUGH PROCESS QUEUE MANAGEMENT UNDER TRANSFER BATCHING

This research investigated the value of protecting the continuity of release batchs in a transfer batching environment, by modifying the SPT rule. A simulation model of a job shop was used to test the modified SPT rule. The performance measures evaluated were mean flow time, flow time variance, and mean lateness. Conditions under which the SPT modification improved results were as follows: large number of transfer batches, small setup time to process time ratio, and large variation in process times from station to station. The results suggest that shop loading is not a significant factor affecting performance of the modified SPT rule.     

Dynamic selection of dispatching rules for job shop scheduling

Although the academic contribution to job shop scheduling is abundant, its impact on practice has been minimal. The most preferred approach to job shop scheduling in the industry is dispatching rules. A major criticism against dispatching rules is that there is no single universal rule. The effective choice of dispatching rules depends on the scheduling criterion and existing job shop conditions. In this paper, the authors have proposed a scheduling method based on the analytic hierarchy process, that dynamically selects the most appropriate dispatching rule from several candidate rules. The selection is based on the existing job shop conditions. This method is applied to two formal job shop problems, and the results for single dispatching rules are inferior to the method proposed in this paper.     

An Application of Master Schedule Smoothing and Planned Lead Time Control

Make‐to‐order (MTO) manufacturers must ensure concurrent availability of all parts required for production, as any unavailability may cause a delay in completion time. A major challenge for MTO manufacturers operating under high demand variability is to produce customized parts in time to meet internal production schedules. We present a case study of a producer of MTO offshore oil rigs that highlights the key aspects of the problem. The producer was faced with an increase in both demand and demand variability. Consequently, it had to rely heavily on subcontracting to handle production requirements that were in excess of its capacity. We focused on the manufacture of customized steel panels, which represent the main sub‐assemblies for building an oil rig. We considered two key tactical parameters: the planning window of the master production schedule and the planned lead time of each workstation. Under the constraint of a fixed internal delivery lead time, we determined the optimal planning parameters. This improvement effort reduced the subcontracting cost by implementing several actions: the creation of a master schedule for each sub‐assembly family of the steel panels, the smoothing of the master schedule over its planning window, and the controlling of production at each workstation by its planned lead time. We report our experience in applying the analytical model, the managerial insights gained, and how the application benefits the oil‐rig producer.     

Priority dispatching rules in an assembly shop

This paper reports the results of a job shop computer simulation study in which jobs were made up of several parts, and where operations on the different parts can be going on at the same time in different machining centres. Priority rules are evaluated in terms of average job flow time, and have been chosen mainly for their ability to coordinate the completion time of the various job parts. A rule based on the minimum remaining job time has been found to produce the best results. The paper also attempts to classify the various priority rules in terms of their operational significance.     

A comparative analysis of due date based job sequencing rules in a flow shop with multiple processors

The literature on job scheduling recognizes the importance of due date performance criteria such as mean tardiness and maximum tardiness. A number of studies test a large number of sequencing rules for these criteria in job shop and flow shop settings. The object of this present research is to examine the performance of some well-known priority rules in a flow shop with multiple processors. This study investigates the performance of ten priority rules in terms of mean and maximum tardiness. It examines the effects of problem characteristics, such as number of jobs, number of machines stages and number of parallel processors at each stage, and the performance of priority rules using regression analysis. The findings of the study suggest that the primary determinants of tardiness-based criteria are problem characteristics. In addition, both the regression analysis and the analysis of variance provide strong evidence of the strategy-effect. Finally, a detailed performance review of examined priority rules for various problem characteristics is presented.     

Benchmark Schedules for Subcontracted Operations: Decentralization Inefficiencies that Arise from Competition and First‐Come‐First‐Served Processing*

Subcontracting has become a prominent business practice across many industries. Subcontracting of industrial production is generally based on short‐term need for additional processing capacity, and is frequently employed by manufacturers to process customer orders more quickly than using only in‐house production. In this article, we study a popular business model where multiple manufacturers, each capable of processing his entire workload in‐house, have the option to subcontract some of their operations to a single third party with a flexible resource. Each manufacturer can deliver customer orders only after his entire batch of jobs, processed in‐house and at the third party, is completed. The third party facility is available to several manufacturers who compete for its use. Current business practice of First‐Come‐First‐Served (FCFS) processing of the subcontracted workloads as well as the competitive Nash equilibrium schedules developed in earlier studies result in two types of inefficiencies; the third party capacity is not maximally utilized, and the manufacturers incur decentralization cost. In this article, we develop models to assess the value created by coordinating the manufacturers' subcontracting decisions by comparing two types of centralized control against FCFS and Nash equilibrium schedules. We present optimal and/or approximate algorithms to quantify the third party underutilization and the manufacturers' decentralization cost. We find that both inefficiencies are more severe with competition than they are when the third party allocates capacity in an FCFS manner. However, in a decentralized setting, a larger percentage of the players prefer Nash equilibrium schedules to FCFS schedules. We extend our analysis to incomplete information scenarios where manufacturers reveal limited demand information, and find that more information dramatically benefits the third party and the manufacturers, however, the marginal benefit of additional information is decreasing. Finally, we discuss an extension wherein each manufacturer's objective takes into account asymmetries in subcontracting, in‐house processing, and delay costs.     

AN EVALUATION OF SEQUENCING RULES FOR AN ASSEMBLY SHOP

Research relating to sequencing rules in simple job shops has proliferated, but there has not been a corresponding proliferation of research evaluating similar sequencing rules in more complex assembly job shops. In a simple job shop, all operations are performed serially; but an assembly shop encompasses both serial and parallel operations. As a result of the increased complexity of assembly shops, the results associated with the performance of sequencing rules in simple job shops cannot be expected for an assembly shop. In this paper, 11 sequencing rules (some of which are common to simple job shops and some decigned specifically for assembly shops) are evaluated using a simulation analysis of a hypothetical assembly shop. The simulation results are analyzed using an ANOVA procedure that identifies significant differences in the results of several performance measures. Sensitivity analysis also is performed to determine the effect of job structure on the performance of the sequencing rules.     

Workload Control and Order Release: A Lean Solution for Make‐to‐Order Companies

Protecting throughput from variance is the key to achieving lean. Workload control (WLC) accomplishes this in complex make‐to‐order job shops by controlling lead times, capacity, and work‐in‐process (WIP). However, the concept has been dismissed by many authors who believe its order release mechanism reduces the effectiveness of shop floor dispatching and increases work center idleness, thereby also increasing job tardiness results. We show that these problems have been overcome. A WLC order release method known as “LUMS OR” (Lancaster University Management School order release) combines continuous with periodic release, allowing the release of work to be triggered between periodic releases if a work center is starving. This paper refines the method based on the literature (creating “LUMS COR” [Lancaster University Management School corrected order release]) before comparing its performance against the best‐performing purely periodic and continuous release rules across a range of flow directions, from the pure job shop to the general flow shop. Results demonstrate that LUMS COR and the continuous WLC release methods consistently outperform purely periodic release and Constant WIP. LUMS COR is considered the best solution in practice due to its excellent performance and ease of implementation. Findings have significant implications for research and practice: throughput times and job tardiness results can be improved simultaneously and order release and dispatching rules can complement each other. Thus, WLC represents an effective means of implementing lean principles in a make‐to‐order context.     

Shop Floor Control When Tacit Worker Knowledge is Important

We investigate a shop where the workers and supervisors have tacit knowledge of how to operate efficiently and where efficiency is important to providing capacity to meet demand. This tacit knowledge includes setup dependencies between products as well as which worker or machine is best suited for a particular product. We discuss a real‐world shop where this is the case. Management expects workers and supervisors to use their knowledge to schedule efficiently by monitoring their performance based on standards. The question that we explore is how management should control for due date performance in light of the discretion given to the workers and supervisors to sequence jobs on the basis of efficiency. We explore management control of due date performance through the use of order review and release (ORR) and management expediting. We find that although ORR is quite effective at reducing work‐in‐process (WIP) inventories, it may foster very late deliveries in a shop such as this. In fact, under such conditions, deftly executed expediting with no ORR at all can be far more effective at supporting all deliveries. Even improving ORR into a hybrid by actively updating path efficiencies (observed from supervisor/worker scheduling) did not support a change to this conclusion. Conversely, when conditions are created where tacit knowledge plays a reduced role or utilization is decreased, ORR delivers in a timely manner. The interaction between utilization, WIP levels, and worker knowledge all help dictate the appropriate control methodology.