TY - JOUR

T1 - Simple subcontracting rules for make-to-order shops with limited subcontractor capacity

T2 - an assessment by simulation

AU - Thurer, Matthias

AU - Stevenson, Mark

AU - Qu, Ting

PY - 2015

Y1 - 2015

N2 - Companies that produce a high variety of customised products often suffer from large fluctuations in demand. Subcontracting can be an important means of overcoming resulting capacity shortages during high demand periods. A set of effective subcontracting rules, for determining which jobs to subcontract and which to produce internally, has recently been presented in the literature for this type of company. But evaluations of these rules have assumed subcontractor capacity is infinite. This study examines the impact of limited subcontractor capacity on the performance of the three best-performing subcontracting rules for make-to-order companies using a simulation model of an assembly job shop. Limiting subcontractor capacity inhibits the ability of a subcontracting rule to protect the internal shop from surges in demand, which negatively affects performance. However, significant performance differences between the rules evaluated are maintained, which underlines the importance of choosing the right subcontracting rule. Further analysis reveals that a limit on the work that can be subcontracted leads to less work being subcontracted more often, which requires adequate response by management. Meanwhile, the assumption of infinite capacity results in sporadically subcontracting a large amount of work. The results have important implications for future research and practice.

AB - Companies that produce a high variety of customised products often suffer from large fluctuations in demand. Subcontracting can be an important means of overcoming resulting capacity shortages during high demand periods. A set of effective subcontracting rules, for determining which jobs to subcontract and which to produce internally, has recently been presented in the literature for this type of company. But evaluations of these rules have assumed subcontractor capacity is infinite. This study examines the impact of limited subcontractor capacity on the performance of the three best-performing subcontracting rules for make-to-order companies using a simulation model of an assembly job shop. Limiting subcontractor capacity inhibits the ability of a subcontracting rule to protect the internal shop from surges in demand, which negatively affects performance. However, significant performance differences between the rules evaluated are maintained, which underlines the importance of choosing the right subcontracting rule. Further analysis reveals that a limit on the work that can be subcontracted leads to less work being subcontracted more often, which requires adequate response by management. Meanwhile, the assumption of infinite capacity results in sporadically subcontracting a large amount of work. The results have important implications for future research and practice.

KW - subcontracting

KW - subcontractor capacity

KW - make-to-order

KW - assembly job shop

U2 - 10.1080/09537287.2015.1019590

DO - 10.1080/09537287.2015.1019590

M3 - Journal article

VL - 26

SP - 1145

EP - 1161

JO - Production Planning and Control

JF - Production Planning and Control

SN - 0953-7287

IS - 13

ER -