  A high-tech manufacturer often produces products that consist of many
modules. These modules are either sourced from one of its suppliers or produced
in-house. In this paper we study an assembly system in which one module is
sourced from a supplier with a fixed lead-time, while the other module is
produced by the manufacturer itself in a make-to-order production system. Since
unavailability of one of the modules has costly consequences for the production
of the end-product, it is important to coordinate between the ordering policy
for one module and the production of the other. We propose an order policy for
the lead-time module with base-stock levels depending on the number of
outstanding orders in the production system of the in-house produced module. We
prove monotonicity properties of this policy and show optimality. Furthermore,
we conduct a computational experiment to evaluate how the costs of this policy
compare to those of a policy with fixed base-stock levels and show that average
savings of 17% are attained.
