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©2008 informs asymptotically optimal control for an assemble-to-order system with capacitated component production and fixed transport costs.
| Content Provider | CiteSeerX |
|---|---|
| Author | Plambeck, Erica L. |
| Abstract | This paper examines a two-tier assemble-to-order system. Customer orders for various products must be filled within the product-specific target lead time, or become lost sales. A product can be assembled instantaneously if its required components are in stock at the assembly facility. The production facility for each component is geographically distant from the assembly facility, and the transportation lead time is deterministic. Each shipment of components incurs a fixed cost and a variable cost per unit. The system manager must initially commit to the production capacity for each component. Then, in response to customer orders, he must dynamically manage production (expediting and salvaging) and shipping for each component, and the sequence of customer orders for assembly (how scarce components are allocated to outstanding orders). The objective is to minimize expected discounted costs for lost sales, production, and shipping. This discounted formulation accounts for financial inventory holding costs but not physical inventory holding costs. The main result is that as the order arrival rate for each product becomes large and the discount rate becomes small, a simple threshold policy with independent control of each component is asymptotically optimal. The policy is parameterized by five numbers for each component. Expressions for these parameters, the expected discounted cost, and the long-run average rates of salvaging and expediting are obtained by solving an approximating Brownian control problem. In a numerical example from the computer industry, the Brownian approximation is remarkably accurate. Subject classifications: inventory/production; assemble-to-order; stochastic optimal control. |
| File Format | |
| Access Restriction | Open |
| Subject Keyword | Assemble-to-order System Customer Order Fixed Transport Cost Informs Asymptotically Optimal Control Capacitated Component Production Assembly Facility Lost Sale Financial Inventory Subject Classification Stochastic Optimal Control Various Product Outstanding Order Main Result Brownian Control Problem Inventory Production Computer Industry Long-run Average Rate Discounted Cost Discount Rate Two-tier Assemble-to-order System Product-specific Target Lead Time Discounted Formulation Account Scarce Component System Manager Production Facility Fixed Cost Transportation Lead Time Numerical Example Physical Inventory Production Capacity Order Arrival Rate Brownian Approximation Required Component Independent Control Simple Threshold Policy Variable Cost |
| Content Type | Text |
| Resource Type | Article |
