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Optimal material control in an assembly system with component commonality

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  • Narendra Agrawal
  • Morris A. Cohen

Abstract

Allocation of scarce common components to finished product orders is central to the performance of assembly systems. Analysis of these systems is complex, however, when the product master schedule is subject to uncertainty. In this paper, we analyze the cost—service performance of a component inventory system with correlated finished product demands, where component allocation is based on a fair shares method. Such issuing policies are used commonly in practice. We quantify the impact of component stocking policies on finished product delays due to component shortages and on product order completion rates. These results are used to determine optimal base stock levels for components, subject to constraints on finished product service (order completion rates). Our methodology can help managers of assembly systems to (1) understand the impact of their inventory management decisions on customer service, (2) achieve cost reductions by optimizing their inventory investments, and (3) evaluate supplier performance and negotiate contracts by quantifying the effect of delivery lead times on costs and customer service. © 2001 John Wiley & Sons, Inc. Naval Research Logistics 48:409–429, 2001

Suggested Citation

  • Narendra Agrawal & Morris A. Cohen, 2001. "Optimal material control in an assembly system with component commonality," Naval Research Logistics (NRL), John Wiley & Sons, vol. 48(5), pages 409-429, August.
    • Handle: RePEc:wly:navres:v:48:y:2001:i:5:p:409-429
    DOI: 10.1002/nav.1026
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    References listed on IDEAS

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    Cited by:

    1. Yao Zhao, 2008. "Evaluation and Optimization of Installation Base-Stock Policies in Supply Chains with Compound Poisson Demand," Operations Research, INFORMS, vol. 56(2), pages 437-452, April.
    2. Wenyuan Wang & Daniel Y. Mo & Yue Wang & Mitchell M. Tseng, 2019. "Assessing the cost structure of component reuse in a product family for remanufacturing," Journal of Intelligent Manufacturing, Springer, vol. 30(2), pages 575-587, February.
    3. Kai Huang, 2014. "Benchmarking non-first-come-first-served component allocation in an assemble-to-order system," Annals of Operations Research, Springer, vol. 223(1), pages 217-237, December.
    4. Jie Chu & Kai Huang, 2020. "Integrating decisions with advance supply information in an assemble‐to‐order system," Naval Research Logistics (NRL), John Wiley & Sons, vol. 67(1), pages 34-44, February.
    5. Yao Zhao & David Simchi-Levi, 2006. "Performance Analysis and Evaluation of Assemble-to-Order Systems with Stochastic Sequential Lead Times," Operations Research, INFORMS, vol. 54(4), pages 706-724, August.
    6. Kathryn E. Caggiano & Peter L. Jackson & John A. Muckstadt & James A. Rappold, 2007. "Optimizing Service Parts Inventory in a Multiechelon, Multi-Item Supply Chain with Time-Based Customer Service-Level Agreements," Operations Research, INFORMS, vol. 55(2), pages 303-318, April.
    7. Plambeck, Erica L. & Ward, Amy R., 2005. "Optimal Control of High-Volume Assemble-to-Order Systems," Research Papers 1890, Stanford University, Graduate School of Business.
    8. Kai Huang & Ton de Kok, 2015. "Optimal FCFS allocation rules for periodic‐review assemble‐to‐order systems," Naval Research Logistics (NRL), John Wiley & Sons, vol. 62(2), pages 158-169, March.
    9. Erica L. Plambeck & Amy R. Ward, 2006. "Optimal Control of a High-Volume Assemble-to-Order System," Mathematics of Operations Research, INFORMS, vol. 31(3), pages 453-477, August.
    10. Martin I. Reiman & Qiong Wang, 2015. "Asymptotically Optimal Inventory Control for Assemble-to-Order Systems with Identical Lead Times," Operations Research, INFORMS, vol. 63(3), pages 716-732, June.
    11. Willem van Jaarsveld & Alan Scheller-Wolf, 2015. "Optimization of Industrial-Scale Assemble-to-Order Systems," INFORMS Journal on Computing, INFORMS, vol. 27(3), pages 544-560, August.
    12. Sechan Oh & Karthik Sourirajan & Markus Ettl, 2014. "Joint Pricing and Production Decisions in an Assemble-to-Order System," Manufacturing & Service Operations Management, INFORMS, vol. 16(4), pages 529-543, October.
    13. Jérémie Gallien & Ngai‐Hang Z. Leung & Prashant Yadav, 2021. "Inventory Policies for Pharmaceutical Distribution in Zambia: Improving Availability and Access Equity," Production and Operations Management, Production and Operations Management Society, vol. 30(12), pages 4501-4521, December.

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