We analyze a assembled-to-order manufacturing systems with multiple end products. The individual components required for each end product can be made either at a shared in-house manufacturing facility or at dedicated facilities of external suppliers. The in-house manufacturing facility and supplier facilities differ in terms of costs and service level capabilities. Using Markov decision process models, we determine the optimal policy and characterize its structure. We also compare the performance of the optimal policies with other sub-optimal policies with simpler structure.
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