Combined make-to-order and make-to-stock in a food production system

The research into multi-product production/inventory control systems has mainly assumed one of the two strategies: make-to-order (MTO) or make-to-stock (MTS). In practice, however, many companies cater to an increasing variety of products with varying logistical demands (e.g. short due dates, specific products) and production characteristics (e.g. capacity usage, set-up) to different market segments and so they are moving to more MTO production. As a consequence they operate under a hybrid MTO–MTS strategy. Important issues arising out of such situations are, for example, which products should be manufactured to stock and which ones on order, and how to allocate capacity among various MTO–MTS products. This paper presents the state-of-the-art literature review of the combined MTO–MTS production situations. A variety of production management issues in the context of food processing companies, where combined MTO–MTS production is quite common, are discussed in detail. The authors propose a comprehensive hierarchical planning framework that covers the important production management decisions to serve as a starting point for evaluation and further research on the planning system for MTO–MTS situations.