Analysis of an assemble-to-order system with different review periods

A.G. Karaarslan, G.P. Kiesmuller, A.G. Kok, de

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Abstract

We consider a single item assembled from two components. One of the components has a long leadtime, high holding cost and short review period as compared to the other one. We assume that net stocks are reviewed periodically, customer demand is stochastic and unsatisfied demand is back ordered. We analyze the system under two different policies and show how to determine the policy parameters minimizing average holding and backorder costs. First, we consider a pure base stock policy, where orders for each component are placed such that the inventory position is raised up to a given base stock level. In contrast to this, only the orders for one component follow this logic while the other orders are synchronized in case of a balanced base stock policy. Through mathematical analysis, we come up with the exact long-run average cost function and we show the optimality conditions for both policies. In a numerical study the policies are compared and the results suggest that the balanced base stock policy works better than the pure base stock policy under low service levels and when there is a big difference in the holding costs of the components.
Original languageEnglish
Place of PublicationEindhoven
PublisherTechnische Universiteit Eindhoven
Number of pages33
Publication statusPublished - 2011

Publication series

NameBETA publicatie : working papers
Volume360
ISSN (Print)1386-9213

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Assemble-to-order
Order systems
Base-stock policy
Costs
Cost function
Lead time
Average cost
Backorder
Base stock
Service levels
Optimality conditions
Logic
Mathematical analysis

Cite this

Karaarslan, A. G., Kiesmuller, G. P., & Kok, de, A. G. (2011). Analysis of an assemble-to-order system with different review periods. (BETA publicatie : working papers; Vol. 360). Eindhoven: Technische Universiteit Eindhoven.
Karaarslan, A.G. ; Kiesmuller, G.P. ; Kok, de, A.G. / Analysis of an assemble-to-order system with different review periods. Eindhoven : Technische Universiteit Eindhoven, 2011. 33 p. (BETA publicatie : working papers).
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Karaarslan, AG, Kiesmuller, GP & Kok, de, AG 2011, Analysis of an assemble-to-order system with different review periods. BETA publicatie : working papers, vol. 360, Technische Universiteit Eindhoven, Eindhoven.

Analysis of an assemble-to-order system with different review periods. / Karaarslan, A.G.; Kiesmuller, G.P.; Kok, de, A.G.

Eindhoven : Technische Universiteit Eindhoven, 2011. 33 p. (BETA publicatie : working papers; Vol. 360).

Research output: Book/ReportReportAcademic

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AB - We consider a single item assembled from two components. One of the components has a long leadtime, high holding cost and short review period as compared to the other one. We assume that net stocks are reviewed periodically, customer demand is stochastic and unsatisfied demand is back ordered. We analyze the system under two different policies and show how to determine the policy parameters minimizing average holding and backorder costs. First, we consider a pure base stock policy, where orders for each component are placed such that the inventory position is raised up to a given base stock level. In contrast to this, only the orders for one component follow this logic while the other orders are synchronized in case of a balanced base stock policy. Through mathematical analysis, we come up with the exact long-run average cost function and we show the optimality conditions for both policies. In a numerical study the policies are compared and the results suggest that the balanced base stock policy works better than the pure base stock policy under low service levels and when there is a big difference in the holding costs of the components.

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Karaarslan AG, Kiesmuller GP, Kok, de AG. Analysis of an assemble-to-order system with different review periods. Eindhoven: Technische Universiteit Eindhoven, 2011. 33 p. (BETA publicatie : working papers).