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Performance analysis and optimization of assemble-to-order systems with random lead times

Publication ,  Journal Article
Song, JS; Yao, DD
Published in: Operations Research
January 1, 2002

We study a single-product assembly system in which the final product is assembled to order whereas the components (subassemblies) are built to stock. Customer demand follows a Poisson process, and replenishment lead times for each component are independent and identically distributed random variables. For any given base-stock policy, the exact performance analysis reduces to the evaluation of a set of M/G/∞ queues with a common arrival stream. We show that unlike the standard M/G/∞ queueing system, lead time (service time) variability degrades performance in this assembly system. We also show that it is desirable to keep higher base-stock levels for components with longer mean lead times (and lower unit costs). We derive easy-to-compute performance bounds and use them as surrogates for the performance measures in several optimization problems that seek the best trade-off between inventory and customer service. Greedy-type algorithms are developed to solve the surrogate problems. Numerical examples indicate that these algorithms provide efficient solutions and valuable insights to the optimal inventory/service trade-off in the original problems.

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Published In

Operations Research

DOI

ISSN

0030-364X

Publication Date

January 1, 2002

Volume

50

Issue

5

Related Subject Headings

  • Operations Research
  • 3507 Strategy, management and organisational behaviour
  • 1503 Business and Management
  • 0802 Computation Theory and Mathematics
  • 0102 Applied Mathematics
 

Citation

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Song, J. S., & Yao, D. D. (2002). Performance analysis and optimization of assemble-to-order systems with random lead times. Operations Research, 50(5). https://doi.org/10.1287/opre.50.5.889.372
Song, J. S., and D. D. Yao. “Performance analysis and optimization of assemble-to-order systems with random lead times.” Operations Research 50, no. 5 (January 1, 2002). https://doi.org/10.1287/opre.50.5.889.372.
Song, J. S., and D. D. Yao. “Performance analysis and optimization of assemble-to-order systems with random lead times.” Operations Research, vol. 50, no. 5, Jan. 2002. Scopus, doi:10.1287/opre.50.5.889.372.

Published In

Operations Research

DOI

ISSN

0030-364X

Publication Date

January 1, 2002

Volume

50

Issue

5

Related Subject Headings

  • Operations Research
  • 3507 Strategy, management and organisational behaviour
  • 1503 Business and Management
  • 0802 Computation Theory and Mathematics
  • 0102 Applied Mathematics