The effect of various production strategies on product structures with commonality

Although the focus in MRP research has remained on tactical issues, this study will deal with several broader issues by analyzing some very simple product structures in order to make clear statements concerning the performance of selected production strategies. The major research question considered in this study involves the effect of commonality on system performance under various production planning strategies. The strategies include the two pure approaches of make-to-stock and make-to-order and the hybrid assemble-to-order strategy, which is a combination of make-to-order and make-to-stock. Performance measures of importance are total cost of operation (set-up and holding costs) and the variance in work-in-process inventories. These have been selected because of the concern among practitioners to reduce costs of operation as well as the degree of variability in shop floor loads. For the purposes of comparison, a mixed-integer programming solution to the various experimental conditions is determined. The major results of a four-way analysis of variance that includes production strategy, level of commonality, cost ratio (set-up to holding cost), and random-demand streams as experimental factors, follows: (1) High commonality models are less cost sensitive to the production strategy applied than low commonality models. (2) High commonality can lead to high load variation particularly at lower levels of the product structure. (3) The choice of a production strategy becomes more cost sensitive as cost ratios (set-up to holding) increase. (4) Product structures with low cost ratios are less sensitive to load variation than those with high ratios.