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Demand Fulfillment Rates In An Assembleto‐ Order System With Multiple Products And Dependent Demands

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  • ALEX X. ZHANG

Abstract

This paper presents a model for evaluating product fulfillment rates in an assemble‐to‐order system with a two‐level bill‐of‐material structure (products and components). Inventories are kept at the component level and are used to support service levels to product demands; each component is managed under a periodically reviewed, decentralized order‐up‐to policy. Product demands are correlated in a given period but are independent across periods. We develop the demand fulfillment rate for each product when demands are filled based on a first‐come‐first‐served discipline with limited priorities for different products within a period. We show that the fulfillment rate can be expressed as a multivariate normal probability when the product demands follow a multivariate normal distribution. We then use a numerical example to discuss computational issues and bounds associated with the evaluation of the demand fulfillment rates. Finally, we consider a model for minimizing the total inventory investment subject to given product demand fulfillment rates.

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  • Alex X. Zhang, 1997. "Demand Fulfillment Rates In An Assembleto‐ Order System With Multiple Products And Dependent Demands," Production and Operations Management, Production and Operations Management Society, vol. 6(3), pages 309-324, September.
    • Handle: RePEc:bla:popmgt:v:6:y:1997:i:3:p:309-324
    DOI: 10.1111/j.1937-5956.1997.tb00433.x
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