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Optimal decisions for assemble-to-order systems with uncertain assembly capacity

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  • Xiao, Yongbo
  • Chen, Jian
  • Lee, Chung-Yee

Abstract

In this paper we study a single-product, single-period assemble-to-order (ATO) model with uncertain assembly capacity. To reduce the risk/cost, the manufacturer may need to assemble in advance. Also, when the demand is realized, he/she may need to place emergency component orders. We present a profit-maximization model that makes optimal inventory and production decisions. We establish structural properties of the optimal solutions, and identify the sufficient and necessary condition under which assemble-in-advance strategy should be adopted. We further extend the model to the situation where assembly outsourcing can be used to make up for the capacity shortage. Numerical experiments are conducted to show the impact of uncertainties associated with demand and capacity.

Suggested Citation

  • Xiao, Yongbo & Chen, Jian & Lee, Chung-Yee, 2010. "Optimal decisions for assemble-to-order systems with uncertain assembly capacity," International Journal of Production Economics, Elsevier, vol. 123(1), pages 155-165, January.
    • Handle: RePEc:eee:proeco:v:123:y:2010:i:1:p:155-165
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    References listed on IDEAS

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    1. Vernon Ning Hsu & Chung Yee Lee & Kut C. So, 2006. "Optimal Component Stocking Policy for Assemble-to-Order Systems with Lead-Time-Dependent Component and Product Pricing," Management Science, INFORMS, vol. 52(3), pages 337-351, March.
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    7. Ke Fu & Vernon Ning Hsu & Chung-Yee Lee, 2006. "Inventory and Production Decisions for an Assemble-to-Order System with Uncertain Demand and Limited Assembly Capacity," Operations Research, INFORMS, vol. 54(6), pages 1137-1150, December.
    8. Patrik Alfredsson & Jos Verrijdt, 1999. "Modeling Emergency Supply Flexibility in a Two-Echelon Inventory System," Management Science, INFORMS, vol. 45(10), pages 1416-1431, October.
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    Cited by:

    1. Gao, Chunyan & Shen, Houcai & Cheng, T.C.E., 2010. "Order-fulfillment performance analysis of an assemble-to-order system with unreliable machines," International Journal of Production Economics, Elsevier, vol. 126(2), pages 341-349, August.
    2. Li, Yanhai & Ou, Jinwen, 2020. "Optimal ordering policy for complementary components with partial backordering and emergency replenishment under spectral risk measure," European Journal of Operational Research, Elsevier, vol. 284(2), pages 538-549.
    3. Heydari, Jafar & Govindan, Kannan & Sadeghi, Razieh, 2018. "Reverse supply chain coordination under stochastic remanufacturing capacity," International Journal of Production Economics, Elsevier, vol. 202(C), pages 1-11.
    4. Guo Li & Hui Mao & Lei Xiao, 2017. "Impacts of Leader–Follower Structure on Pricing and Production Strategies in a Decentralized Assembly System," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(01), pages 1-24, February.
    5. Mohammed Hichame Benbitour & Evren Sahin & Yves Dallery, 2019. "The use of rush deliveries in periodic review assemble-to-order systems," Post-Print hal-01997380, HAL.
    6. Fei Zhang & Zailin Guan & Li Zhang & Yanyan Cui & Pengxing Yi & Saif Ullah, 2019. "Inventory management for a remanufacture-to-order production with multi-components (parts)," Journal of Intelligent Manufacturing, Springer, vol. 30(1), pages 59-78, January.
    7. Lin, Junyi & Naim, Mohamed M. & Spiegler, Virginia L.M., 2020. "Delivery time dynamics in an assemble-to-order inventory and order based production control system," International Journal of Production Economics, Elsevier, vol. 223(C).
    8. Atan, Zümbül & Ahmadi, Taher & Stegehuis, Clara & Kok, Ton de & Adan, Ivo, 2017. "Assemble-to-order systems: A review," European Journal of Operational Research, Elsevier, vol. 261(3), pages 866-879.
    9. Xiao, Tiaojun & (Junmin) Shi, Jim, 2016. "Pricing and supply priority in a dual-channel supply chain," European Journal of Operational Research, Elsevier, vol. 254(3), pages 813-823.
    10. Xu Guan & Guo Li & Zhe Yin, 2016. "The implication of time-based payment contract in the decentralized assembly system," Annals of Operations Research, Springer, vol. 240(2), pages 641-659, May.
    11. Golmohammadi, Amirmohsen & Taghavi, Majid & Farivar, Samira & Azad, Nader, 2018. "Three strategies for engaging a buyer in supplier development efforts," International Journal of Production Economics, Elsevier, vol. 206(C), pages 1-14.

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