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The value of component commonality in a dynamic inventory system with lead times

Publication ,  Journal Article
Song, JS; Zhao, Y
Published in: Manufacturing and Service Operations Management
June 1, 2009

Component commonality has been widely recognized as a key factor in achieving product variety at low cost. Yet the theory on the value of component commonality is rather limited in the inventory literature. The existing results were built primarily on single-period models or periodic-review models with zero lead times. In this paper, we consider a continuous-review system with positive lead times. We find that although component commonality is in general beneficial, its value depends strongly on component costs, lead times, and dynamic allocation rules. Under certain conditions, several previous findings based on static models do not hold. In particular, component commonality does not always generate inventory benefits under certain commonly used allocation rules. We provide insight on when component commonality generates inventory benefits and when it may not. We further establish some asymptotic properties that connect component lead times and costs to the impact of component commonality. Through numerical studies, we demonstrate the value of commonality and its sensitivity to various system parameters in between the asymptotic limits. In addition, we show how to evaluate the system under a new allocation rule, a modified version of the standard first-in-first-out rule. ©2009 INFORMS.

Duke Scholars

Published In

Manufacturing and Service Operations Management

DOI

EISSN

1526-5498

ISSN

1523-4614

Publication Date

June 1, 2009

Volume

11

Issue

3

Start / End Page

493 / 508

Related Subject Headings

  • Operations Research
  • 4901 Applied mathematics
  • 3509 Transportation, logistics and supply chains
  • 1505 Marketing
  • 1503 Business and Management
  • 0102 Applied Mathematics
 

Citation

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Song, J. S., & Zhao, Y. (2009). The value of component commonality in a dynamic inventory system with lead times. Manufacturing and Service Operations Management, 11(3), 493–508. https://doi.org/10.1287/msom.1080.0235
Song, J. S., and Y. Zhao. “The value of component commonality in a dynamic inventory system with lead times.” Manufacturing and Service Operations Management 11, no. 3 (June 1, 2009): 493–508. https://doi.org/10.1287/msom.1080.0235.
Song JS, Zhao Y. The value of component commonality in a dynamic inventory system with lead times. Manufacturing and Service Operations Management. 2009 Jun 1;11(3):493–508.
Song, J. S., and Y. Zhao. “The value of component commonality in a dynamic inventory system with lead times.” Manufacturing and Service Operations Management, vol. 11, no. 3, June 2009, pp. 493–508. Scopus, doi:10.1287/msom.1080.0235.
Song JS, Zhao Y. The value of component commonality in a dynamic inventory system with lead times. Manufacturing and Service Operations Management. 2009 Jun 1;11(3):493–508.

Published In

Manufacturing and Service Operations Management

DOI

EISSN

1526-5498

ISSN

1523-4614

Publication Date

June 1, 2009

Volume

11

Issue

3

Start / End Page

493 / 508

Related Subject Headings

  • Operations Research
  • 4901 Applied mathematics
  • 3509 Transportation, logistics and supply chains
  • 1505 Marketing
  • 1503 Business and Management
  • 0102 Applied Mathematics