Setting procurement safety lead-times for assembly systems

Setting procurement safety lead-times for assembly systems

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Article ID: iaor20022305
Country: United Kingdom
Volume: 39
Issue: 15
Start Page Number: 3459
End Page Number: 3478
Publication Date: Jan 2001
Journal: International Journal of Production Research
Authors: ,
Keywords: production: MRP
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 a material requirement planning (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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