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Production and Inventory Control of a Single Product Assemble-to-Order System with Multiple Customer Classes
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Production and Inventory Control of a Single Product Assemble-to-Order System with Multiple Customer Classes
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Journal Article
Production and Inventory Control of a Single Product Assemble-to-Order System with Multiple Customer Classes
2006
Overview
We consider the optimal production and inventory control of an assemble-to-order system with m components, one end-product, and n customer classes. A control policy specifies when to produce each component and, whenever an order is placed, whether or not to satisfy it from on-hand inventory. We formulate the problem as a Markov decision process and characterize the structure of an optimal policy. We show that a base-stock production policy is optimal, but the base-stock level for each component is dynamic and depends on the inventory level of all other components (more specifically, it is nondecreasing). We show that the optimal inventory allocation for each component is a rationing policy with different rationing levels for different demand classes. The rationing levels for each component are dynamic and also nondecreasing in the inventory level of all other components. We compare the performance of the optimal policy to heuristic policies, including the commonly used base-stock policy with fixed base-stock levels, and find them to perform surprisingly well, especially for systems with lost sales.
Publisher
INFORMS,Institute for Operations Research and the Management Sciences
Subject
/ assemble-to-order (ATO) systems
/ Decision theory. Utility theory
/ Demand
/ Exact sciences and technology
/ Inventory control, production control. Distribution
/ Operational research and scientific management
/ Operational research. Management science
/ production and inventory control
/ Queuing theory. Traffic theory
/ Sales
/ Studies
