With increasing product variety and escalating demand volatility, manufacturing industry is moving towards high product mix and low order volume production. Consequently, achieving high service level and low manufacturing cost simultaneously in such dynamic environment becomes ever challenging. Typically, most order fulfillment approaches take manufacturing flexibility as an effective mean to buffer the market uncertainty and resolve demand-supply mismatching problems in the high mix low volume production environment. However, to tackle the challenge purely by using manufacturing flexibility sometimes can reach a limit, and it can be very expensive. On the other hand, it has been observed that customers are often indifferent to certain product specs and delivery schedules. This custome...[ Read more ]

With increasing product variety and escalating demand volatility, manufacturing industry is moving towards high product mix and low order volume production. Consequently, achieving high service level and low manufacturing cost simultaneously in such dynamic environment becomes ever challenging. Typically, most order fulfillment approaches take manufacturing flexibility as an effective mean to buffer the market uncertainty and resolve demand-supply mismatching problems in the high mix low volume production environment. However, to tackle the challenge purely by using manufacturing flexibility sometimes can reach a limit, and it can be very expensive. On the other hand, it has been observed that customers are often indifferent to certain product specs and delivery schedules. This customer behavior brings additional degree of freedom in promising customer orders and arranging production resources. In this research, this customer behavior is named “customer flexibility”.

It has been recognized that the customer flexibility does appear in the interface between the customer and the manufacturing firm during a process of making order commitments. The order commitment process, which commits product specifications and delivery schedules to customer order requests, plays the most critical role in tackling the challenge through matching the customer requirements with manufacturing capabilities and available resources.

To this end, this research takes a new perspective to tackle the challenge of matching customer needs with manufacturing resources by integrating customer flexibility into the order commitment process. In order to do that, a systematic approach to characterize and measure customer flexibility is developed. Models and algorithms are then developed for order commitment decision making, which integrate both customer flexibility and manufacturing flexibility to facilitate demand-supply matching in high mix low volume production environments. An industrial case study in a garment manufacturing company is conducted to verify the proposed approaches and to study the interactions between customer flexibility and manufacturing flexibility with regards to the impacts on system performances. It has been demonstrated that a better positioning of manufacturing flexibility together with a proactive management of customer flexibility can help the manufacturer better shape the manufacturing capability and customer demand, and achieve improved demand-supply matching in this dynamic production environment.