Effects of component commonality and perishability on inventory control in assemble-to-order systems

Abstract

The perishable inventories in the research are often viewed as an item to think over the optimal ordering quantity, instead of a part to perform an assembly process. For the products made of both perishable and non-perishable components, they cannot be simply dealt with by a series of newsvendor models. In this study, an inventory control problem in an assemble-to-order production system is considered in which a common component and two perishable ones with different durabilities are assembled into two products. An inventory policy is established for the availability of the nonperishable common component and the backorders of the two products at the beginning of a period, so as to determine the optimal ordering strategies of the common component and the two perishable ones. Also, a dynamic programming approach is used to address the multi-period problem concerning the lifetime of the perishable components with the relevant costs. The proposed approach enhances profits by avoiding losses caused by inappropriate inventory allocation of perishable and common components in assembly process, which shows its effectiveness demonstrated through numerical application.