Effects of demand substitution on a multi-product and multi-stage ramp-up production system

Abstract

A robust framework should support the simultaneous launch of multiple products within a single production system, optimizing the use of shared resources. These products often differ in key characteristics such as resource consumption rates, production costs, and quality performance. Consequently, the degree of interchangeability among products becomes a critical factor affecting the system's efficiency and profitability. In this context, demand substitution mechanisms play an essential role in addressing imbalances between demand requirements and available supply capacity during the ramp-up phase. To tackle these challenges, we propose a set of mathematical models that extend the existing multi-product ramp-up production planning framework by incorporating various demand substitution modes, including one-way and two-way substitution. Through extensive numerical analyses, we conduct sensitivity studies to evaluate the impact of different substitution strategies on system profitability. Based on the findings, we provide managerial insights and practical implications to support decision-making and improve overall production system performance.