Establishing an Adaptive Production-Procurement System with Markov Chain Approach Associated with 3C Theory

Problem statement: In this study, we classify the imperfect situations that the unreliability of production and the defective products might be incurred from production process into eight independently recurrent categories. Approach: With the property of recurrence of Markov chain, the limiting probability of each imperfect production category can be calculated through the transition probabilities matrix generated from these imperfect production categories. Results: The 3C Theory has been applied based on a certain group of products to integrate the relationship between order model and resource requirement plans. Therefore, an adaptive (s, Q) production system with Markov Chain Approach associated with (R, s, S) procurement system based on 3C Theory has been proposed to smooth supply disruptions incurred from imperfect production. Conclusion/Recommendations: We have demonstrated that the candidate solutions identified by the proposed method are not only superior to traditional EPQ model solutions, but also result in significantly smaller cost flow variability.