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On the Benefits of Pooling in Production-Inventory Systems

Author

Listed:
  • Saif Benjaafar

    (Department of Mechanical Engineering, Graduate Program in Industrial Engineering, University of Minnesota, Minneapolis, Minnesota 55455)

  • William L. Cooper

    (Department of Mechanical Engineering, Graduate Program in Industrial Engineering, University of Minnesota, Minneapolis, Minnesota 55455)

  • Joon-Seok Kim

    (Strategy Consulting Team, Samsung SDS, Seoul, 135-918, Korea)

Abstract

We study inventory pooling in systems with symmetric costs where supply lead times are endogenously generated by a finite-capacity production system. We investigate the sensitivity of the cost advantage of inventory pooling to various system parameters, including loading, service levels, demand and production time variability, and structure of the production system. The analysis reveals differences in how various parameters affect the cost reduction from pooling and suggests that these differences stem from the manner in which the parameters influence the induced correlation between lead-time demands of the demand streams. We compare these results with those obtained for pure inventory systems, where lead times are exogenous. We also compare inventory pooling with several forms of capacity pooling.

Suggested Citation

  • Saif Benjaafar & William L. Cooper & Joon-Seok Kim, 2005. "On the Benefits of Pooling in Production-Inventory Systems," Management Science, INFORMS, vol. 51(4), pages 548-565, April.
    • Handle: RePEc:inm:ormnsc:v:51:y:2005:i:4:p:548-565
    DOI: 10.1287/mnsc.1040.0303
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    References listed on IDEAS

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