Introduction

Abstract

Decisions on manufacturing capacity and production planning parameters are continuously faced by manufacturing companies to improve their performance. To determine this performance, internal and external performance indicators can be applied. Important external performance indicators for make-to-order (MTO) production systems are service level and average tardiness. Service level denotes the percentage of orders or pieces delivered on time and average tardiness states how much later than the due date the orders are delivered. Important internal performance indicators are capacity invested and inventory held. To identify an optimum between these conflicting internal and external objectives of a manufacturing company, inventory and capacity invested are weighted by costs which are minimized whereby either tardiness costs are added or a service level constraint is considered. These four conflicting key performance indicators can be influenced by capacity investment and work release to the production system.