DEMAND FULFILLMENT RATES IN AN ASSEMBLETO‐ ORDER SYSTEM WITH MULTIPLE PRODUCTS AND DEPENDENT DEMANDS

Alex X. Zhang

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Supply Chain and Inventory Management Management and Optimization Techniques Product Development and Customization

Abstract

This paper presents a model for evaluating product fulfillment rates in an assemble‐to‐order system with a two‐level bill‐of‐material structure (products and components). Inventories are kept at the component level and are used to support service levels to product demands; each component is managed under a periodically reviewed, decentralized order‐up‐to policy. Product demands are correlated in a given period but are independent across periods. We develop the demand fulfillment rate for each product when demands are filled based on a first‐come‐first‐served discipline with limited priorities for different products within a period. We show that the fulfillment rate can be expressed as a multivariate normal probability when the product demands follow a multivariate normal distribution. We then use a numerical example to discuss computational issues and bounds associated with the evaluation of the demand fulfillment rates. Finally, we consider a model for minimizing the total inventory investment subject to given product demand fulfillment rates.

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References

1964Analysis of Inventory Systems.1986Decision systems for inventory management and production planning 1988Numerical Techniques for Stochastic Optimization 1970Principles of Operations Research.1981Multi-level production/inventory control systems : theory and practice 1989Optimal Inventory Policies for Assembly Systems Under Random Demands 1986The Effect of Commonality on Safety Stock in a Simple Inventory Model 1988Component Commonality with Service Level Requirements

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2014Toward a Resilient Holistic Supply Chain Network System: Concept, Review and Future Direction 2010A Stochastic Programming Based Inventory Policy for Assemble-to-Order Systems with Application to the W Model 2006Optimal Control of a High-Volume Assemble-to-Order System 2011Analysis of an assemble-to-order system with different review periods 2010No-Holdback Allocation Rules for Continuous-Time Assemble-to-Order Systems 2007

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