Production Flexibility and Inventory Management: A Decision Support Model For Inventory Optimization

Abstract

Building flexible structures within a company is an important tool for coping with changes. Process flexibility targets production facilities or workers to easily change their productions from a product to another without significant changeover costs. This study presents a Linear Programming Model for a production system with inventory costs and several process flexibility options. The model has been used to compare alternative process flexibility designs in terms of inventory costs. The experimental results demonstrate that (i) systems with process flexibility outperforms dedicated systems and (ii) limited flexibility designs may perform almost as efficient as full flexibility designs.