A periodic inventory model for stocking modular components

Douglas J. Thomas, Donald P. Warsing

Research output: Contribution to journalArticle

9 Scopus citations

Abstract

We study the benefit obtained by exploiting modular product design in fulfilling exogenous demand for both a complete assembly and its components in a service parts inventory system. Our goal is to reduce overall service system costs by allowing assembly and/or disassembly (A/D) to occur at some unit cost per A/D action. In an extensive set of computational experiments, we compare a naïve stocking and operating policy that treats all items independently and ignores the modular product structure and related A/D capability to the optimal base stock policy, and to a policy that allows A/D from the naïve stocking levels. While extensive computational analysis shows that the optimal base stock policy improves the system cost between 3 to 26% over the naïve approach, simply allowing A/D from the naïve stocking levels captures a significant portion (an average of 67%) of the naïve-optimal gap. Our computational results demonstrate that the optimization shifts the component-assembly mix from the naïve levels and that limiting A/D capacity affects this mix. Limiting A/D capacity can actually increase the expected number of A/D actions (versus the uncapacitated case), since the optimization shifts stocking levels to reduce the probability that "too many" actions will be required.

Original languageEnglish (US)
Pages (from-to)343-359
Number of pages17
JournalProduction and Operations Management
Volume16
Issue number3
StatePublished - May 1 2007

All Science Journal Classification (ASJC) codes

  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Management of Technology and Innovation

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