Modelling the effect of custom and stock orders on supply-chain performance

We model a manufacturer–manufacturer supply chain producing a custom, termed make-to-order (MTO) product, and a stock, termed make-to-stock (MTS) product. The key parameters considered by the model are correlations in the MTO and MTS demand processes, the relative proportion of the MTO demands, production planning strategy by facility, the length of time in advance of production that the schedule must be frozen for each facility, transportation lead time and delays in the transmission of information. Supply-chain performance is measured by production variability and the amount of safety stock required to satisfy a fixed fill rate. The results of the analysis underscore the criticality of taking an integrated view of demand management, production planning, transportation service selection and information flow across the supply-chain.