Optimal and Asymptotically Optimal Policies for Assemble-to-Order N- and W-Systems
Naval Research Logistics, Volume 62, Issue 8, December 2015
Posted: 11 Oct 2014 Last revised: 15 Sep 2016
Date Written: August 23, 2015
We consider two specially structured assemble-to-order (ATO) systems -- the N- and W-systems -- under continuous review, stochastic demand, and non-identical component replenishment leadtimes. Using a hybrid approach that combines sample-path analysis, linear programming, and the tower property of conditional expectation, we characterize the optimal component replenishment policy and common-component allocation rule, present comparative statics of the optimal policy parameters, and show that some commonly used heuristic policies can lead to significant optimality loss. The optimality results require a certain symmetry in the cost parameters. In the absence of this symmetry, we show that, for systems with high demand volume, the asymptotically optimal policy has essentially the same structure; otherwise, the optimal policies have no clear structure. For these latter systems, we develop heuristic policies and show their effectiveness.
Keywords: Inventory Control, Assemble-to-order system, asymptotical analysis
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