Stochastic Programming Formulations and Structural Properties for Assemble-to-Order Systems

Abstract

Lowering the degree of component commonality may yield a higher type-II service level for a periodic review assemble-to-order system that aims to maximize reward. This is achieved via separating inventories of all the shared components for different products. We investigate the optimal bill-of-materials structure for two-product assemble-to-order systems with arbitrary number of components. The inventory of a shared component can be separated or common between different products. We show that an optimal bill-of-materials can be characterized between the following two extremal configurations: either two products share all common components, or they do not share any common component.