Analysis of flexibility with rationing for a mix of manufacturing facilities

A major competitive advantage of a flexible manufacturing facility is its ability to cope with uncertainties in demand. At a strategic level, capacity-size decisions for a mix of flexible facilities (each not necessarily producing the same combination of products) are made based on aggregates of product types. Such an approach overlooks possible capacity-devouring by some products, arising at the operational level, when the aggregate demand for the period exceeds the available capacity. A rationing policy is required to ensure that the available aggregate capacity of the facilities is shared equitably. In this article, it is shown that such a rationing policy has an impact on the required capacity size and, therefore, must be integrated with the decisions at the strategic level. Several properties indicating the relative preferences of certain facility strategies are also established.