Coordination of stocking decisions in an assemble-to-order environment
This paper examines an assemble-to-order environment involving a short-life-cycle product that is sold in two different configurations, each requiring a unique component that must be stocked in advance. Both configurations of the product are assembled on the same equipment which has limited capacity. The focus of the analysis is on the determination of the appropriate stocking quantities for each of the configuration specific components. Because the same assembly capacity is often reused for different instances of the component stocking problem, we treat assembly capacity as exogenous. This represents the fact that capacity decisions are often made less frequently than are procurement/production quantity decisions. We first solve for the first-best stocking policy when the components are produced internally. We then consider the case when the components are procured from external suppliers, and investigate how different forms of contract between the assembler and the component suppliers affect coordination of the supply chain as well as each party's profit. One particularly interesting finding is that it is possible to coordinate the supply chain with a single-price contract between each supplier and the assembler while awarding all parties positive profit.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gérard P. Cachon & Martin A. Lariviere, 2001. "Contracting to Assure Supply: How to Share Demand Forecasts in a Supply Chain," Management Science, INFORMS, vol. 47(5), pages 629-646, May.
- Jan A. Van Mieghem & Nils Rudi, 2002. "Newsvendor Networks: Inventory Management and Capacity Investment with Discretionary Activities," Manufacturing & Service Operations Management, INFORMS, vol. 4(4), pages 313-335, August.
- Martin A. Lariviere & Evan L. Porteus, 2001. "Selling to the Newsvendor: An Analysis of Price-Only Contracts," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 293-305, May.
- Yunzeng Wang & Yigal Gerchak, 2003. "Capacity Games in Assembly Systems with Uncertain Demand," Manufacturing & Service Operations Management, INFORMS, vol. 5(3), pages 252-267, January.
- 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.
- Gérard P. Cachon, 2004. "The Allocation of Inventory Risk in a Supply Chain: Push, Pull, and Advance-Purchase Discount Contracts," Management Science, INFORMS, vol. 50(2), pages 222-238, February.
- Fernando Bernstein & Gregory A. DeCroix, 2004. "Decentralized Pricing and Capacity Decisions in a Multitier System with Modular Assembly," Management Science, INFORMS, vol. 50(9), pages 1293-1308, September.
- Yigal Gerchak & Michael J. Magazine & A. Bruce Gamble, 1988. "Component Commonality with Service Level Requirements," Management Science, INFORMS, vol. 34(6), pages 753-760, June.
- Harrison, J. Michael & Van Mieghem, Jan A., 1999. "Multi-resource investment strategies: Operational hedging under demand uncertainty," European Journal of Operational Research, Elsevier, vol. 113(1), pages 17-29, February.
When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:189:y:2008:i:2:p:540-558. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.