Effect of increasing component commonality on service level and holding cost

The authors investigate the effect of increasing component commonality in an assemble-to-order system. Numerical investigation of two end products that share up to three components, and whose demands are identically distributed according to either the exponential or the geometric distribution, shows that increasing component commonality results in increasing marginal returns when the criteria are aggregate service level and aggregate stock requirements. For arbitrary end-product demands and general service measurements, it is shown that the optimal holding cost for a given service level is concave in the level of commonality.