Omid Arghish - Department Of Industrial Engineering, Gachsaran Branch, Islamic Azad University, Gachsaran, Iran.

This paper develops a mathematical modeling to design a cellular manufacturing system. In addition some of the total or portion of the demand of the part types can be subcontracted.. In order to designing the optimal CMS, we needs to detrmined a plan to produce and subcontract parts at a minimum cost and to mitigate the impact of subcontracting risk.Thus we propose a mixed integer programming approach to decision making and incorporate subcontracting risk . To control the risk of sub-contracting (cost) , the two popular percentile measures of risk are applied: value-at-risk and conditional value-at-risk. This model is capable of optimizing production cost of parts and calculating value-at-risk of sub-contracting cost simultaneously. A numerical example is solved to verify the performance of the proposed model.

Cellular manufacturing system, sub contract, Risk management , Conditional value-at-risk