n Management Dynamics : Journal of the Southern African Institute for Management Scientists - A two-product single period manufacturing and supply system

Volume 12, Issue 2
  • ISSN : 1019-567X



This paper considers a problem of joint coordination between manufacturing and supplying departments. The manufacturing department is responsible for meeting the random demand of two products with short life cycles. Demands for the two products are assumed to be substitutable. The supply departments' responsibility is to provide a sufficient quantity of raw material so that the required production level can be achieved. When coordination prevails, both the department's decisions on how much material to purchase and how much to produce, are jointly made. Otherwise, decisions are made independently, without any exchange of information. If the random demand exceeds the quantity produced, a second production run can be expedited at a substantially higher cost. The problem is considered as a single-period decision problem, and expression for the expected profit is obtained. A numerical illustration is presented; using discrete optimisation to determine the optimal production run sizes, while maximising expected profit.

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