In this paper, we present the effect of buffer storage capacity un two-stage transfer lines in such a way as to introduce the production rate to be reduced which is called a Slowed Down(SD) state. A Markov model is used to establish a formulation for the analysis of the delays associated with the stage to be starved or blocked. Operating policies are proposed by analyzing the effect of the decision variables such as the production rates, the failure rates, buffer capacities and SD rates through computer simulation experiments.