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Component part stocking policies

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  • Ricardo Ernst
  • David F. Pyke

Abstract

This article presents research designed to aid firms who assemble many components into a final product. We assume that purchase quantities are fixed, and that all parts and components are assembled at one stage in a short time. Demand for the final product is represented by a stationary independent and identically distributed random variable; and unmet demand is backordered. Ordering is done on a periodic review basis. We develop infinite horizon, approximate expected cost, and expected service level functions, and we present an algorithm for finding approximately minimum cost reorder points for each part subject to a service level constraint. Extensive results on the accuracy of the approximations are presented. Due to the size of the problem, we present only limited results on the performance of the optimization algorithm.

Suggested Citation

  • Ricardo Ernst & David F. Pyke, 1992. "Component part stocking policies," Naval Research Logistics (NRL), John Wiley & Sons, vol. 39(4), pages 509-529, June.
    • Handle: RePEc:wly:navres:v:39:y:1992:i:4:p:509-529
    DOI: 10.1002/1520-6750(199206)39:43.0.CO;2-O
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    References listed on IDEAS

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    1. Wijngaard, J. & Wortmann, J. C., 1985. "MRP and inventories," European Journal of Operational Research, Elsevier, vol. 20(3), pages 281-293, June.
    2. Charles P. Schmidt & Steven Nahmias, 1985. "Optimal Policy for a Two-Stage Assembly System under Random Demand," Operations Research, INFORMS, vol. 33(5), pages 1130-1145, October.
    3. Jonsson, Henrik & Silver, Edward A., 1989. "Common component inventory problems with a budget constraint: Heuristics and upper bounds," Engineering Costs and Production Economics, Elsevier, vol. 18(1), pages 71-81, October.
    4. Kenneth R. Baker & Michael J. Magazine & Henry L. W. Nuttle, 1986. "The Effect of Commonality on Safety Stock in a Simple Inventory Model," Management Science, INFORMS, vol. 32(8), pages 982-988, August.
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    Cited by:

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    2. Narendra Agrawal & Stephen A. Smith, 2003. "Optimal retail assortments for substitutable items purchased in sets," Naval Research Logistics (NRL), John Wiley & Sons, vol. 50(7), pages 793-822, October.
    3. Stephen A. Smith & Narendra Agrawal, 2000. "Management of Multi-Item Retail Inventory Systems with Demand Substitution," Operations Research, INFORMS, vol. 48(1), pages 50-64, February.
    4. Jing-Sheng Song & Candace A. Yano & Panupol Lerssrisuriya, 2000. "Contract Assembly: Dealing with Combined Supply Lead Time and Demand Quantity Uncertainty," Manufacturing & Service Operations Management, INFORMS, vol. 2(3), pages 287-296, July.
    5. Alex X. Zhang, 1997. "Demand Fulfillment Rates In An Assembleto‐ Order System With Multiple Products And Dependent Demands," Production and Operations Management, Production and Operations Management Society, vol. 6(3), pages 309-324, September.
    6. Markus Ettl & Gerald E. Feigin & Grace Y. Lin & David D. Yao, 2000. "A Supply Network Model with Base-Stock Control and Service Requirements," Operations Research, INFORMS, vol. 48(2), pages 216-232, April.
    7. Zhao, Yao, 2009. "Analysis and evaluation of an Assemble-to-Order system with batch ordering policy and compound Poisson demand," European Journal of Operational Research, Elsevier, vol. 198(3), pages 800-809, November.

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