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Component Commonality with Service Level Requirements

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Author Info

  • Yigal Gerchak

    (Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada N2L 3G1)

  • Michael J. Magazine

    (Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada N2L 3G1)

  • A. Bruce Gamble

    (Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada N2L 3G1)

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    Abstract

    This paper extends recent results of Baker et al. (Baker, K. R., M. J. Magazine, H. L. W. Nuttle. 1986. The effect of commonality on safety stocks in a simple inventory model. Management Sci. 32 982--988.) in understanding the impact of component commonality on stocking levels under service level constraints. A model is formulated for an arbitrary number of products with general joint demand distribution. The results obtained are not all intuitive. While utilizing commonality is beneficial, nothing general can be said about the resulting change in the components' stock levels. When the cost structure is of a particular simple form, though, some interesting general patterns do emerge. We also discuss the case of using a service-level measure where rationing of common components might be required, and characterize the implied rationing rule.

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    File URL: http://dx.doi.org/10.1287/mnsc.34.6.753
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 34 (1988)
    Issue (Month): 6 (June)
    Pages: 753-760

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    Handle: RePEc:inm:ormnsc:v:34:y:1988:i:6:p:753-760

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    Related research

    Keywords: inventory/production; measure of effectiveness; stochastic models; ordering policies;

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    Citations

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    Cited by:
    1. 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.
    2. Zhang, Xinyan & Huang, George Q., 2010. "Game-theoretic approach to simultaneous configuration of platform products and supply chains with one manufacturing firm and multiple cooperative suppliers," International Journal of Production Economics, Elsevier, vol. 124(1), pages 121-136, March.
    3. 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.
    4. Hsieh, Ying-Jiun, 2011. "Demand switching criteria for multiple products: An inventory cost analysis," Omega, Elsevier, vol. 39(2), pages 130-137, April.
    5. Chen-Ritzo, Ching-Hua & Ervolina, Tom & Harrison, Terry P. & Gupta, Barun, 2011. "Component rationing for available-to-promise scheduling in configure-to-order systems," European Journal of Operational Research, Elsevier, vol. 211(1), pages 57-65, May.
    6. Nils Boysen & Armin Scholl, 2009. "A General Solution Framework for Component-Commonality Problems," BuR - Business Research, German Academic Association for Business Research, vol. 2(1), pages 86-106, May.
    7. 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.
    8. 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.
    9. 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.
    10. 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.
    11. Hillier, Mark S., 2002. "Using commonality as backup safety stock," European Journal of Operational Research, Elsevier, vol. 136(2), pages 353-365, January.
    12. 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.
    13. 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.
    14. 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.
    15. 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.

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