Optimal dynamic scheduling policy for a make-to-stock production system

This paper considers the dynamic scheduling problem of a single-server, make-to-stock queue with two products. For the case of Poisson demands and exponential production times, we show that it is optimal to produce the product with the larger b mu index when it is backordered. Lf the production times are identically distributed, the optimal policy can further be characterized by monotone switching curves. We also prove that a base stock policy coupled with a switching curve is optimal for some Initial inventory levels. A simple linear switching rule for determining production priority is proposed and compared with other heuristic policies in a computational experiment.