Optimal ordering policy in simple inventory models with modularization and postponement

Abstract

Modularization and postponement are the two issues regarding product and process redesign required for adaptation of enterprises to the trends of globalization, customization, quick response and rapid technology changes. Past studies have explored these issues in abstracts or through practical discussion of specific cases. This study discusses the effects of these two issues on inventory control. A cost, hereafter called the service cost, is used to reduce the risk of underestimating the variable costs. Specifically, a simple multi-item inventory system (a vanilla box and optional components) with periodic review is proposed, and solution procedures are developed for the models. Depending on the characteristics of the proposed models, some heuristic methods are suggested. The results reveal that (1) the time required for the generic production process plays an important role, and thus, outsourcing, reprocessing, and the vanilla box redesign are suitable and considerable policies to reduce the time of generic production process. (2) The larger aggregate service level enables the demands of the end-product with the smaller end-item demand to be completely fulfilled. (3) The proposed models provide a reference for a multilevel inventory model for component commonality in an inventory/production system.