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The Effect of Commonality on Safety Stock in a Simple Inventory Model

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Author Info

  • Kenneth R. Baker

    (The Amos Tuck School of Business Administration, Dartmouth College, Hanover, New Hampshire 03755)

  • Michael J. Magazine

    (Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada)

  • Henry L. W. Nuttle

    (Department of Industrial Engineering, North Carolina State University, Raleigh, North Carolina 27695)

Registered author(s):

    Abstract

    We examine the effects of component commonality on optimal safety stock levels in a two-product, two-level inventory model. The criterion is to minimize system safety stock subject to a service level constraint. Although our model is specialized, its analysis provides insights not available in other multilevel inventory models.

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    File URL: http://dx.doi.org/10.1287/mnsc.32.8.982
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 32 (1986)
    Issue (Month): 8 (August)
    Pages: 982-988

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    Handle: RePEc:inm:ormnsc:v:32:y:1986:i:8:p:982-988

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    Related research

    Keywords: inventory/production; measures of effectiveness; multi-echelon;

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    Cited by:
    1. Sahba, Pedram & BalcIog[small tilde]lu, BarIs, 2011. "The impact of transportation delays on repairshop capacity pooling and spare part inventories," European Journal of Operational Research, Elsevier, vol. 214(3), pages 674-682, November.
    2. Brun, Alessandro & Capra, Eugenio & Miragliotta, Giovanni, 2009. "VRP revisited: The impact of behavioural costs in balancing standardisation and variety," International Journal of Production Economics, Elsevier, vol. 117(1), pages 16-29, January.
    3. Mohebbi, E. & Choobineh, F. & Pattanayak, A., 2007. "Capacity-driven vs. demand-driven material procurement systems," International Journal of Production Economics, Elsevier, vol. 107(2), pages 451-466, June.
    4. Zhang, Juliang & Shou, Biying & Chen, Jian, 2013. "Postponed product differentiation with demand information update," International Journal of Production Economics, Elsevier, vol. 141(2), pages 529-540.
    5. Ma, Shihua & Wang, Wei & Liu, Liming, 2002. "Commonality and postponement in multistage assembly systems," European Journal of Operational Research, Elsevier, vol. 142(3), pages 523-538, November.
    6. Hillier, Mark S., 2002. "Using commonality as backup safety stock," European Journal of Operational Research, Elsevier, vol. 136(2), pages 353-365, January.
    7. Droge, Cornelia & Vickery, Shawnee K. & Jacobs, Mark A., 2012. "Does supply chain integration mediate the relationships between product/process strategy and service performance? An empirical study," International Journal of Production Economics, Elsevier, vol. 137(2), pages 250-262.
    8. Nils Boysen & Armin Scholl, 2008. "A general solution framework for component commonality problems," Jena Research Papers in Business and Economics - Working and Discussion Papers 12/2008, Friedrich-Schiller-University Jena, School of Economics and Business Administration.
    9. Persona, Alessandro & Battini, Daria & Manzini, Riccardo & Pareschi, Arrigo, 2007. "Optimal safety stock levels of subassemblies and manufacturing components," International Journal of Production Economics, Elsevier, vol. 110(1-2), pages 147-159, October.
    10. Kim, Kilsun & Chhajed, Dilip, 2000. "Commonality in product design: Cost saving, valuation change and cannibalization," European Journal of Operational Research, Elsevier, vol. 125(3), pages 602-621, September.
    11. Mohebbi, E. & Choobineh, F., 2005. "The impact of component commonality in an assemble-to-order environment under supply and demand uncertainty," Omega, Elsevier, vol. 33(6), pages 472-482, December.
    12. Yang, Hongsuk & Schrage, Linus, 2009. "Conditions that cause risk pooling to increase inventory," European Journal of Operational Research, Elsevier, vol. 192(3), pages 837-851, February.
    13. Hausman, Warren H. & Lee, Hau L. & Zhang, Alex X., 1998. "Joint demand fulfillment probability in a multi-item inventory system with independent order-up-to policies," European Journal of Operational Research, Elsevier, vol. 109(3), pages 646-659, September.
    14. Zhou, Li & Grubbstrom, R.W.Robert W., 2004. "Analysis of the effect of commonality in multi-level inventory systems applying MRP theory," International Journal of Production Economics, Elsevier, vol. 90(2), pages 251-263, July.
    15. Hsieh, Ying-Jiun, 2011. "Demand switching criteria for multiple products: An inventory cost analysis," Omega, Elsevier, vol. 39(2), pages 130-137, April.
    16. Ernst, Ricardo & Kamrad, Bardia, 2000. "Evaluation of supply chain structures through modularization and postponement," European Journal of Operational Research, Elsevier, vol. 124(3), pages 495-510, August.
    17. Albrecht, Martin, 2014. "Determining near optimal base-stock levels in two-stage general inventory systems," European Journal of Operational Research, Elsevier, vol. 232(2), pages 342-349.
    18. Tibben-Lembke, Ronald S. & Bassok, Yehuda, 2005. "An inventory model for delayed customization: A hybrid approach," European Journal of Operational Research, Elsevier, vol. 165(3), pages 748-764, September.
    19. Betts, John M. & Johnston, Robert B., 2005. "Just-in-time component replenishment decisions for assemble-to-order manufacturing under capital constraint and stochastic demand," International Journal of Production Economics, Elsevier, vol. 95(1), pages 51-70, January.
    20. NonĂ¥s, Sigrid Lise, 2009. "Finding and identifying optimal inventory levels for systems with common components," European Journal of Operational Research, Elsevier, vol. 193(1), pages 98-119, February.

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