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Optimal and asymptotically optimal policies for assemble‐to‐order n‐ and W‐systems

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  • Lijian Lu
  • Jing‐Sheng Song
  • Hanqin Zhang

Abstract

We consider two specially structured assemble‐to‐order (ATO) systems—the N‐ and W‐systems—under continuous review, stochastic demand, and nonidentical component replenishment leadtimes. Using a hybrid approach that combines sample‐path analysis, linear programming, and the tower property of conditional expectation, we characterize the optimal component replenishment policy and common‐component allocation rule, present comparative statics of the optimal policy parameters, and show that some commonly used heuristic policies can lead to significant optimality loss. The optimality results require certain symmetry in the cost parameters. In the absence of this symmetry, we show that, for systems with high demand volume, the asymptotically optimal policy has essentially the same structure; otherwise, the optimal policies have no clear structure. For these latter systems, we develop heuristic policies and show their effectiveness. © 2016 Wiley Periodicals, Inc. Naval Research Logistics 62: 617–645, 2015

Suggested Citation

  • Lijian Lu & Jing‐Sheng Song & Hanqin Zhang, 2015. "Optimal and asymptotically optimal policies for assemble‐to‐order n‐ and W‐systems," Naval Research Logistics (NRL), John Wiley & Sons, vol. 62(8), pages 617-645, December.
    • Handle: RePEc:wly:navres:v:62:y:2015:i:8:p:617-645
    DOI: 10.1002/nav.21671
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    2. Jie Chu & Kai Huang, 2020. "Integrating decisions with advance supply information in an assemble‐to‐order system," Naval Research Logistics (NRL), John Wiley & Sons, vol. 67(1), pages 34-44, February.
    3. Karaarslan, Gönül A. & Atan, Zümbül & de Kok, Ton & Kiesmüller, Gudrun P., 2018. "Optimal and heuristic policies for assemble-to-order systems with different review periods," European Journal of Operational Research, Elsevier, vol. 271(1), pages 80-96.

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