Design of Flexible Multi-Stage Processes
Article first published online: 15 APR 2011
© 2011 Production and Operations Management Society
Production and Operations Management
Volume 21, Issue 1, pages 194–203, January-February 2012
How to Cite
Eynan, A. and Dong, L. (2012), Design of Flexible Multi-Stage Processes. Production and Operations Management, 21: 194–203. doi: 10.1111/j.1937-5956.2011.01240.x
- Issue published online: 5 JAN 2012
- Article first published online: 15 APR 2011
- History: Received: April 2008; Accepted: November 2010 by Panos Kouvelis, after 1 revision.
- flexible resource;
- flexible capacity;
- multi-stage process;
- process flexibility;
- process design
Faced with demand uncertainty across multiple product lines, many companies have recourse to flexible capacities which can process different products in order to better balance the trade-off between capacity utilization and cost efficiency. Many studies demonstrated the potential benefit of using flexible capacity at the aggregate level by treating a whole plant or a whole process as a single stage. This paper extends these analyses by studying the benefits of flexible capacity while considering the multi-stage structure of processes and consequently determining which stages should be flexible, which should be dedicated, and how much capacity to assign to each stage. We consider a two-product firm which operates in a process-to-order environment and faces uncertain demand. Each stage of the process can be designed as dedicated or flexible. Dedicated resources are highly cost efficient but limited to the single product they are exclusively designed for, whereas flexible resources are versatile to handle several products but are more expensive. Using a general mathematical formulation our analysis shows that the optimal design may have some dedicated and some flexible stages along the process. Interestingly, this decision should be decoupled from the chronological order of the stages along the process.