The impact of component commonality on composite assembly policies

The impact of component commonality on composite assembly policies

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Article ID: iaor20082355
Country: United States
Volume: 54
Issue: 6
Start Page Number: 615
End Page Number: 622
Publication Date: Sep 2007
Journal: Naval Research Logistics
Authors: ,
Keywords: make-to-order, Assembly
Abstract:

Assemble in Advance (AIA) policy reduces assembly cost due to advance planning, while Assemble to Order (ATO) policy eliminates assembly of excessive (more than demanded) units. The tradeoffs between the two policies have been studied in the past for single product environments. Moreover, it was shown that it is beneficial to employ AIA and ATO simultaneously. In this article, we study the employment of such a composite assembly policy in a multiproduct environment with component commonality. When common components are used, ATO may also enable us to benefit from the risk pooling effect. We provide important managerial insights such as: the multiperiod problem is myopic and changes in inventory levels due to the use of common components, and demonstrate the potential profit increase compared to other policies.

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