Integrated Optimisation of In-House Production and Outsourcing Strategy: Genetic Algorithm Based Approach

In this paper, we deal with the problem of balance between two alternative modes for production: in-house production and outsourcing, under a combined approach of maintenance management and production control in multi-periods plan. The considered production system consists of a single randomly failing and repairable machine producing a single product. The production system aims to satisfy the market demands with variable production rates during non-homogeneous periodicities and decides to outsource all or part of demands. Outsourcing is justified by the lack of the production capacity. We consider that the contractor company produces for the manufacturer and offers a multiple pricing schedules that depend on the outsourced production rates requested by the manufacturer. The main objective is to determine simultaneously for each period, the optimal in-house production and the outsourcing rates that should be adopted, in order to satisfy all demands while minimizing the generated total cost of the manufacturer over the plan horizon, including costs of maintenance, production, outsourcing, shortage and holding. We propose a genetic algorithm based optimization and conduct computational experiments to study the managerial insights for the developed strategy.