Dual Sourcing in an Assembly System: A Simple and Effective Critical-Set Base-Surge Policy

Coordinating Dual-Sourcing for Multi-Component Assembly Systems Assembly manufacturers are increasingly relying on dual sourcing—pairing a low-cost regular supplier with a faster but more expensive express option—to enhance supply chain resilience. Yet although dual sourcing is well understood for single items, managing it across multiple components in an assembly system has remained largely unresolved. In the paper, we introduce a novel Critical-Set Base-Surge (CSBS) policy, which combines a constant order policy for regular sources to meet base demand with a Critical-Set (CS) policy for express sources to handle surge demand. By revealing a weaker form of additive separability and proving exponential state convergence under CSBS, we provide a performance bound and establish asymptotic optimality as regular lead times grow. Numerical experiments show that, compared to benchmark policies that apply the Tailored Base-Surge policy, the CSBS policy achieves substantial optimality gap reductions. Furthermore, we propose a CSBS policy with easy-to-compute parameters and demonstrate that it delivers performance comparable with the CSBS policy.

Duke Scholars

Author Jing-Sheng Song Fuqua School of Business