Min. Schemes of Component Allocation in an Assemble-To-Order System

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TITLE: Minimization Schemes of Component Allocation in an Assemble-To-Order System

SPEAKER: Dr. Kai Huang


In an Assemble-To-Order (ATO) system, when the components are allocated according to First-Come-First-Serve (FCFS) rules, they may still stay in the inventory due to the lack of other components. Such inventory is called ``random stock". In the existing literature, there is no effective means to count the random stock, so that an exact cost minimization scheme for ATO system is missing. In this paper, we consider a periodic-review ATO system with base stock inventory replenishment policy. We develop a new concept ``multi-matching", which deviates from previous single item matching in the sense that multiple components must be matched with multiple products. Applying this concept, we are able to define a set of product assembly and component allocation decision variables, which allows us to develop a mathematical program that accurately and simultaneously characterizes the entire operational inventory holding cost and backlogging cost, including random stock holding cost.

We show that there exists an inherent network flow structure in this formulation. We also prove that the formulation is equivalent to a second formulation which only contains the product assembly decision. Furthermore, we compare our cost minimization model with an extension of the reward maximization model of Akcay and Xu (2004). Surprisingly, the reward maximization model can be shown to be an approximation of the cost minimization model under given condition. This relationship allows us to define a new set of holding cost and backlogging cost, which leads to a third equivalent formulation. We also explore the structure of the formulations, and propose an enhanced Benders decomposition algorithm. Our numerical experiments show that the behavior of random stock is very different from classical inventory. Moreover, in general the portion of random stock holding cost is significant enough so that it should be included in any exact cost minimization model. This also implies the necessity of non-FCFS component allocation rules in the future study.

This is a joint SCL/DOS seminar.


  • Workflow Status:Published
  • Created By:Anita Race
  • Created:10/12/2009
  • Modified By:Fletcher Moore
  • Modified:10/07/2016