Abstract
Smart production plays a significant role to maintain good business terms among sup-ply chain players in different situations. Adjustment in production uptime is possible because of the smart production system. The management may need to reduce production uptime to deliver prod-ucts ontime. But, a decrement in production uptime reduces the projected production quantity. Then, the management uses a limited investment for pursuing possible alternatives to maintain production schedules and the quality of products. This present study develops a mathematical model for a smart production system with partial outsourcing and reworking. The market demand for the product is price dependent. The study aims to maximize the total profit of the production system. Even in a smart production system, defective production rate may be less but unavoidable. Those defective products are repairable. The model is solved by classical optimization. Results show that the application of a variable production rate of the smart production for variable market demand has a higher profit than a traditional production (52.65%) and constant demand (12.45%).