Optimal admission control and sequencing in a make-to-stock/make-to-order production system

In this paper, we address the problem of admission control and sequencing i n a production system that produces two classes of products. The first clas s of products is made-to-stock, and the firm is contractually obliged to me et demand for this class of products. The second class of products is made- to-order, and the firm has the option to accept (admit) or reject a particu lar order. The problem is motivated by suppliers in many industries who sig n contracts with large manufacturers to supply them with a given product an d also can take on additional orders from other sources on a make-to-order basis. We model the joint admission control/sequencing decision in the context of a simple two-class M/M/1 queue to gain insight into the following problems: 1. How should a firm decide (a) when to accept or reject an additional ord er, and (b) which type of product to produce next? 2. How should a firm dec ide what annual quantity of orders to commit to when signing a contract to produce the make-to-stock products?