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Effect of increasing component commonality on service level and holding cost

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  • Uttarayan Bagchi
  • Genaro Gutierrez

Abstract

We 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 requirement. For arbitrary end‐product demands and general service measures, it is shown that the optimal holding cost for a given service level is concave in the level of commonality. © 1992 John Wiley & Sons, Inc.

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  • Uttarayan Bagchi & Genaro Gutierrez, 1992. "Effect of increasing component commonality on service level and holding cost," Naval Research Logistics (NRL), John Wiley & Sons, vol. 39(6), pages 815-832, October.
    • Handle: RePEc:wly:navres:v:39:y:1992:i:6:p:815-832
    DOI: 10.1002/1520-6750(199210)39:63.0.CO;2-S
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    References listed on IDEAS

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    1. Yigal Gerchak & Mordechai Henig, 1989. "Component commonality in assemble‐to‐order systems: Models and properties," Naval Research Logistics (NRL), John Wiley & Sons, vol. 36(1), pages 61-68, February.
    2. Kenneth R. Baker & Michael J. Magazine & Henry L. W. Nuttle, 1986. "The Effect of Commonality on Safety Stock in a Simple Inventory Model," Management Science, INFORMS, vol. 32(8), pages 982-988, August.
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    Cited by:

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