An optimal (Q,r) policy for a multipart assembly system under stochastic part procurement lead times

We consider an economic order quantity type model for a simple production system, where a number of parts are acquired to produce a single product and the part procurement lead times are random. Assembly is instantaneous and takes place intermittently in batches but cannot start until all the parts are available. The problem is to simultaneously determine when to order each part and what lot size to produce, namely to determine the reorder point for each part and the assembly lot size, so that the average total cost per unit time, composed of the setup cost, inventory holding costs for the parts and the assembled product, and the shortage cost for the assembled product, is minimized. We then develop a tailormade solution method for this problem to obtain a global optimal solution by taking advantage of the structure of the problem formulation, where the nonlinear programming problem is decomposed into a family of subproblems parametrized by the average assembly delay time. Numerical experiments are then conducted for the case of twopart problems, and some interesting observations are made.