A Stochastic Model for Managing an Assemble-To-Order System

One of the important things that can be attributed to the modernization and advances in technology is to customize manufacturing of the product to the needs of the users. In this paper a common customization production approach, assemble-to-order system, is analyzed. We assume that the demands for the components arrive according to independent Poisson processes and those of the end product follow a versatile point process. The production times are assumed to be exponentially distributed. Due to complexity of the model under study, we will resort to simulation to identify the inventory allocation and production decisions. The simulation approach determines the expected total cost and some key system performance measures for various types of demand processes. Using (s, S)-type inventory and threshold policies for inventory rationing we study an optimization problem. Some interesting numerical examples to bring out the qualitative nature of the demand process (for end products) are presented