Setting procurement safety lead-times for assembly systems

Michael G Hegedus · Wallace J. Hopp

27 citations0/0 files storedInternational Journal of Production Research

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Supply Chain and Inventory Management Management and Optimization Techniques Scheduling and Optimization Algorithms

Abstract

This paper describes a practical method for setting safety lead-times for purchased components in assembly systems with uncertainty in the supply process. The approach is specifically designed to be used in an MRP procurement environment. A two-stage production model in which suppliers were uncapacitated with stochastic lead times was developed. Then, a combinatorial optimization method that took advantage of structural properties was developed to produce an optimal integer solution of safety lead-times. In addition to yielding a practical lead-time setting tool, the model led to some interesting policy insights: (1) the flexibility achieved by bringing parts in early may have value even in situations with ideal suppliers; (2) purchasing components in batches offers some of the same protection as does safety lead time, but is less precise and subsequently more expensive; and (3) ignoring the complicating issues of MRP procurement results in far from optimal results.

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References

1989Optimal Inventory Policies for Assembly Systems Under Random Demands 1978Material Requirements Planning 1976MATERIAL REQUIREMENTS PLANNING UNDER UNCERTAINTY 1996Inventory Control with Information About Supply Conditions 1999Order-Fulfillment Performance Measures in an Assemble-to-Order System with Stochastic Leadtimes 1987Setting Planned Leadtimes in Serial Production Systems with Tardiness Costs 1985Optimal Policy for a Two-Stage Assembly System under Random Demand 1987Stochastic Leadtimes in Two-Level Assembly Systems

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2005Material requirements planning with flexible bills-of-material 2018Effect of limited capacity on optimal planning parameters for a multi-item production system with setup times and advance demand information 2005A SURVEY ON SUPPLY PLANNING UNDER UNCERTAINTIES IN MRP ENVIRONMENTS 2020A hybrid genetic algorithm for a multilevel assembly replenishment planning problem with stochastic lead times

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