Integration of assembly and fabrication for make-to-order production

The problem of make-to-order production is as follows. A number of customer-specific orders have to be assembled in a multi-project type environment. Each order is made of different assembly jobs which are interrelated by precedence constraints. To be processed, an assembly job requires in-house fabricated and out-house procured parts as well as capacity of assembly resources (assembly workers, power tools). Different customer orders need the same part types and hence the fabrication of parts has to take into account lot sizing decisions. The overall problem is how to coordinate fabrication and assembly with respect to scarce capacities in the assembly and the fabrication such that the holding- and setup-cost of the entire supply chain – fabrication–assembly – are minimized. This problem has not been treated in the literature so far. Hence, we give a mixed–integer programming model for the problem and discuss its properties. Afterwards, we propose a simple, two-level backward oriented heuristic and evaluate it on a set of benchmark instances.