Scheduling with subcontracting options

• Published in: IIE transactions Vol. 40; no. 12; pp. 1171 - 1184
• Main Authors: Chen, Zhi-Long, Li, Chung-Lun
• Format: Journal Article
• Language: English
• Published: Norcross Taylor & Francis Group 01.12.2008; Taylor & Francis Ltd
• Subjects: asymptotic analysis; Comparative analysis; computational complexity; Cost reduction; Heuristic; Production scheduling; Scheduling; Studies; subcontracting; Subcontracts; worst-case analysis
• ISSN: 0740-817X; 2472-5854; 1545-8830; 2472-5862
• DOI: 10.1080/07408170801975057

Motivated by a problem commonly faced by time-sensitive product manufacturers, an analytical model to study the joint decisions of subcontracting and detailed job scheduling is proposed. In the proposed model, a manufacturer operates in a make-to-order fashion and receives a set of orders from its customers at the beginning of the planning horizon. The orders can be either processed by the manufacturer in-house or subcontracted to one of several available subcontractors, possibly at a higher cost. The manufacturer needs to determine which orders should be produced in-house and which orders should be subcontracted. Furthermore, it needs to determine a production schedule for the orders to be produced in-house. The objective is to minimize the total production and subcontracting cost, subject to a constraint on the maximum completion time of the orders. We analyze the computational complexity of the model, develop a heuristic for solving it and analyze worst-case and asymptotic performances of the heuristic. We also study the value of subcontracting by comparing our model and a model where no subcontracting option is available to the manufacturer. Computational results demonstrate that the subcontracting option gives the manufacturer a significant performance improvement. Related managerial insights are also provided.