This study explores the optimal fabrication runtime for a buyer-vendor incorporated system featuring repairable items, stochastic breakdown, accelerated rate, and multi-delivery strategy. Operating in today’s competitive global market, transnational production firms make every effort to meet client requirements in terms of the due date and quality goods. Further, they also must handle all inevitable events incurred in the manufacturing process, such as unanticipated equipment breakdowns and defective products, with caution to avoid production schedule delay and cost overrun. To examine such a vendor-buyer incorporated system, we build a model to characterize the aforementioned features in the system. The function of total system cost is derived through formulation and analyses. The optimization method and a recursive algorithm are employed to help in deriving the optimal (i.e., cost minimization) fabrication runtime for our problem. An example numerically illustrates how our model, method, and algorithm work. It also reveals the capability of our model in analyzing the impact of each and/or joint feature(s) (e.g., the breakdown, accelerated rate, rework, multi-delivery strategy) on the system’s utilization, optimal runtime, total expenses, and individual cost contributor to assist in managerial decision making, and hence, enabling the firm to gain competitive advantage.

This study uses an alternative fabrication scheme to study the effect of rework of nonconforming items and delayed differentiation on a multiproduct supply-chain system. Traditional economic production quantity model focuses on a single-product inventory system where all products made are assumed to be perfect quality and finished products are issued continuously. To increase machine utilization, lower quality costs in production, and reflect the real-world vendor-buyer integrated systems Chiu et al. (2016a) [Chiu, Y-S.P., Kuo, J-S., Chiu, S. W., Hsieh, Y-T. (2016a). Effect of delayed differentiation on a multiproduct vendor–buyer integrated inventory system with rework. Advances in Production Engineering & Management, 11(4), 333-344.] employed a single-machine two-stage production scheme to study the effects of rework and delayed differentiation on a multi-product supply-chain system. With the intention of further reducing fabrication cycle time, this study considers an alternative two-machine two-stage fabrication scheme to re-explore the problem in Chiu et al. (2016a). Machine one solely produces all common parts for multiple end products. Then, machine two fabricates the customized multiproduct using a common cycle time strategy. Through the use of mathematical modeling and analyses, the optimal production cycle length and distribution policy are derived. Numerical examples are provided to demonstrate practical usage of the research results, and show its significant benefit in reducing fabrication cycle time compared to that obtained from prior studies that used different schemes.