2010
DOI: 10.1287/opre.1090.0772
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A Stochastic Programming Based Inventory Policy for Assemble-to-Order Systems with Application to the W Model

Abstract: We consider assemble-to-order inventory systems with identical component lead times. We use a stochastic program (SP) to develop an inventory strategy that allows preferential component allocation for minimizing total inventory cost. We prove that the solution of a relaxation of this SP provides a lower bound on total inventory cost for all feasible policies. We demonstrate and test our approach on the W system, which involves three components used to produce two products. (There are two unique parts and a com… Show more

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Cited by 69 publications
(51 citation statements)
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“…For such a system, we establish the optimality of the NHB rules assuming certain replenishment policies. Dogru et al (2010) proved results on the joint optimal replenishment and allocation policy for their model, but these results do not carry over to the general system considered here. Interestingly, both studies identify similar cost structures to guarantee optimality, even though the approaches taken are very different.…”
Section: Literature Reviewmentioning
confidence: 79%
See 3 more Smart Citations
“…For such a system, we establish the optimality of the NHB rules assuming certain replenishment policies. Dogru et al (2010) proved results on the joint optimal replenishment and allocation policy for their model, but these results do not carry over to the general system considered here. Interestingly, both studies identify similar cost structures to guarantee optimality, even though the approaches taken are very different.…”
Section: Literature Reviewmentioning
confidence: 79%
“…They show that under Markovian assumptions on demand and production, the optimal replenishment policy is a statedependent base-stock policy, and the optimal allocation rule is a multilevel rationing policy that depends on the inventory levels of all other components. Dogru et al (2010) considered a special case of the W system in which all components have identical constant lead times. They show that when a symmetric cost condition or a "balanced capacity" condition is satisfied, the optimal replenishment policy is a state-independent base-stock policy and the optimal allocation policy is an NHB policy (which they call myopic policies).…”
Section: Literature Reviewmentioning
confidence: 99%
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“…Several authors have managed to partially or fully characterize optimal policies for specific ATO systems: Dogru et al (2010) consider a W -system with backordering and identical component lead times. They establish the optimality of a base-stock replenishment policy and a priority-based backorder clearing rule (without reservation) when the "balanced capacity" condition holds, or when both products have the same unit inventory costs.…”
Section: Introductionmentioning
confidence: 99%