Capacity Allocation in Flexible Production Networks: Theory and Applications

Management Science (Forthcoming)

50 Pages Posted: 31 Jul 2018

See all articles by Guodong Lyu

Guodong Lyu

National University of Singapore (NUS) - NUS Business School

Wang Chi Cheung

Institute of High Performance Computing, Agency for Science, Technology and Research (A*STAR)

Mabel Chou

National University of Singapore (NUS) - Department of Decision Sciences

Chung-Piaw Teo

NUS Business School - Department of Decision Sciences

Zhichao Zheng

Singapore Management University - Lee Kong Chian School of Business

Yuanguang Zhong

South China University of Technology

Date Written: August 8, 2017

Abstract

In many production environments, a fixed network of capacity is shared flexibly between multiple products with random demands. What is the best way to configure the capacity of the production network and to allocate the available capacity, to meet pre-determined fill rate requirements? We develop a new approach for network capacity configuration and allocation, and characterize the relationship between the capacity of the network and the attainable fill rate levels for the products, taking into account the flexibility structure of the network. This builds on a new randomized allocation mechanism to deliver the desired services. We use this theory to investigate the connection between the flexibility structure and capacity configuration. We provide a new perspective to the well-known phenomenon that "long chain is almost as good as the fully flexible network": For given target fill rates, the required capacity level in a long-chain network is close to that in a fully flexible network, and is much lower than a dedicated system. We apply these insights and techniques on problems arising in the design of last mile delivery operations, and in semi-conductor production planning, using real data from two companies.

Keywords: Production Networks; Capacity Configuration; Process Flexibility; Fill Rate Target

Suggested Citation

Lyu, Guodong and Cheung, Wang Chi and Chou, Mabel and Teo, Chung-Piaw and Zheng, Zhichao and Zhong, Yuanguang, Capacity Allocation in Flexible Production Networks: Theory and Applications (August 8, 2017). Management Science (Forthcoming). Available at SSRN: https://ssrn.com/abstract=3210850

Guodong Lyu

National University of Singapore (NUS) - NUS Business School ( email )

15 Kent Ridge Drive
Singapore, 119245
Singapore

Wang Chi Cheung

Institute of High Performance Computing, Agency for Science, Technology and Research (A*STAR) ( email )

Singapore

Mabel Chou

National University of Singapore (NUS) - Department of Decision Sciences ( email )

NUS Business School
BIZ 1 Building, #02-01, 1 Business Link
117592
Singapore

Chung-Piaw Teo

NUS Business School - Department of Decision Sciences ( email )

15 Kent Ridge Drive
Mochtar Riady Building, BIZ 1 8-69
119245
Singapore

Zhichao Zheng (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore
(65) 6808 5474 (Phone)
(65) 6828 0777 (Fax)

HOME PAGE: http://www.zhengzhichao.com

Yuanguang Zhong

South China University of Technology ( email )

School of Business Administration, SCUT
Guangzhou, AR Guangdong 510640
China

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