Assemble in Advance (AIA) policy reduces assembly cost due to advance planning, while Assemble to Order (ATO) policy eliminates assembly of excessive (more than demanded) units. The tradeoffs between the two policies have been studied in the past for single product environments. Moreover, it was shown that it is beneficial to employ AIA and ATO simultaneously. In this article, we study the employment of such a composite assembly policy in a multiproduct environment with component commonality. When common components are used, ATO may also enable us to benefit from the risk pooling effect. We provide important managerial insights such as: the multiperiod problem is myopic and changes in inventory levels due to the use of common components, and demonstrate the potential profit increase compared to other policies.© 2007 Wiley Periodicals, Inc. Naval Research Logistics, 2007

Supply-chain management has become a prominent area for teaching and research. Academics and managers realize that communication and coordination among members of a supply chain enhance its effectiveness, creating financial benefits to be shared by the members. We have collected numerical examples covering (1) location decisions, (2) centralized warehousing, (3) lot sizing with deterministic demand, (4) demand forecasting, (5) pricing, and (6) lot sizing with stochastic demand in a newsvendor environment. The examples are suitable for classroom use, and they illuminate the rewards supply-chain members can obtain by eliminating naturally occurring supply-chain inefficiencies and the costs of not doing so.

In this paper we analyze a two‐period supply contract which allows for order adjustment by the buyer. The buyer is required to place orders for two periods. After observing initial demand, the buyer is then allowed to adjust the second order, paying a per unit order adjustment penalty. We describe the optimal behavior of the buyer under such a contract, both in determining the initial order quantities and in subsequently adjusting the order. We compare the solution to a contract where no adjustment is allowed and to the case where adjustment is allowed without penalty. We demonstrate that flexible contracts can reduce the potentially negative effect of correlation of demand between two periods. Further, we investigate how the duration of the first period vis‐à‐vis the second period affects the profitability of the buyer as a function of the degree of correlation. © 2002 John Wiley & Sons, Inc. Naval Research Logistics, 49: 25–45, 2002; DOI 10.1002/nav.10002

In this paper, we study the design of global facility networks. We present a mixed integer programming model that captures essential design tradeoffs of such networks and explicitly incorporates government subsidies trade tariffs and taxation issues. The resulting formulation can be solved for reasonable size problems with commercially available mathematical programming software. Focusing on special cases of the problem enables us to provide useful insights on preferable international facility networks for various environments. We demonstrate the pervasive, and often dominating, effects of subsidized financing, tariffs, regional trade rules, and taxation in shaping the manufacturing and distribution network of global firms.

Numerous examples exist that illustrate how companies enjoying a strong position in a supply chain unilaterally dictate terms to their suppliers and/or their customers. This paper suggests a mechanism by which a company can coordinate its purchasing and production functions and create an integrated plan that dictates order and production quantities throughout a three-firm channel. Specifically, we model a company that attempts to dictate channel lot sizes by obtaining a quantity discount from its supplier while offering perhaps a different one to its customer. Previous quantity discount research has examined supply chains consisting of only two levels, a seller and a buyer. This paper considers a three-level chain (supplier–manufacturer–retailer) and explores the benefits of using quantity discounts on both ends of the supply chain to decrease costs. We show that incorporating quantity discounts into both ends of the supply chain can significantly decrease costs compared to concentrating only on the lower end. Furthermore, the results of the decentralized procedure described here are robust vis-à-vis a centralized decision-making procedure.

This paper compares and contrasts the current state of the art in the theory of quantity discounts with a field study of 39 firms. We start by categorizing and tabulating the literature pertaining to quantity discounts, and by summarizing the various studies and models according to their perspectives, assumptions, and characteristics. Next we describe current trends in industry with respect to the reasons why firms offer quantity discounts, the characteristics of discount schedules, and the effect of quantity discounts on the extent of centralized purchasing, number of suppliers, and just‐in‐time delivery. Finally, we identify a number of fruitful directions for future research.

In this paper we consider the problem of developing an acquisition policy. Specifically, given a set of potential (qualified) suppliers, from whom should the firm buy the product, in what quantities, and how often? We provide properties of the optimal solution and relate them to the approach of using a single source as advocated by JIT. The solution procedure provides the periodic order quantity from each supplier; the order size; and the firm cycle time as well as how many times per cycle we should order from each supplier. We show that the maximum error of our solution can be made as small as desired.

Product design efforts in recent years have focused on standardization and simplification of the product structure. It has been widely argued that savings, tangible and intangible, can be realized by simplifying the product design. In this study, we examine this belief and show that other issues like flexibility of process and design are important as well. We demonstrate that having process flexibility, e.g., of producing a product in two different ways, using two different product structures (as opposed to one), is advantageous with respect to components purchasing costs. This result is in contrast with the notion of standardization since the variety of components in the flexible design is increased. Properties of savings in purchasing costs associated with the use of this flexible design are provided.

Many governments have established, for various reasons, local confent purchasing rules for companies that wish to operate in their country. These requirements force firms to purchase a certain amount of components from suppliers located in that country. This paper describes local content rules and develops models to select suppliers while satisfying local content provisions. The single plant model can be transformed into a knapsack problem that is solved by a ranking procedure, and the solution provides insight as to the manner in which local content rules impact more generalized models. Furthermore, we illustrate possible negative effects to local industry that may result when governments set the local content percentage too high, and we discuss methods for companies to circumvent local content rules. Finally, we address the issue of local content rules in the context of multi‐plant global sourcing decisions, and we provide an efficient solution procedure for the classical plant location model extended to include local content rules at each site

In this paper we deal with a stochastic project network and consider the impact of activity delay to maximize the expected present value of a project. It is shown that in certain situations, delaying the onset of an activity from its earliest start time can indeed increase the present value of a project due to the postponing of associated negative cash flows. Furthermore, a project that could otherwise be rejected negative expected present value may become profitable positive expected present value due to delay. We demonstrate that even activities on the critical path, as determined by each activity's expected duration, may be profitably delayed. Optimal and approximate procedures are developed to determine the amount of delay of the various activities.

In this paper we study the effects of increasing component commonality for a single-period model. A two-product, two-level configuration under a general component cost structure is considered. The economic implications of replacing different products' components by common components are analyzed. We develop optimal solutions for the Commonality and Non-Commonality (Basic) Models and provide bounds on the total savings resulting from using commonality. We demonstrate, under general and specific component cost structures, that some forms of commonality may not always be a preferred strategy. Furthermore, we present conditions under which commonality should not be used. Finally, an extension to the two-product multicomponent model is provided.

The single-sink fixed-charge transportation problem has many applications in the area of Manufacturing and Transportation—These include the supplier selection problem, the product distribution/fleet selection problem and the process selection problem. In this paper we investigate the single-sink fixed-charge transportation problem. We develop implicit enumeration procedures to solve this problem. These procedures include both domination rules and lower bounds. We also show how the domination rules can be integrated into the lower bounds so as to get even better lower bounds. We test our procedures against the best pre-existing procedure and thereby demonstrate that problems which were previously computationally intractable can now be easily solved.

This paper considers a class of assembly systems with long cycle times (low volume of output) and highly expensive components or subassemblies. Systems such as these are typical for companies in the aerospace industry assembling missiles and airplanes. As each unit of the product moves along the assembly line, its value increases owing to additional parts or components installed and the additional work performed. We show that sequencing activities according to ascending values of the ratios of the 'value added' to activity duration minimizes inventory holding cost within a given workstation. A branch-and-bound procedure is then used to allocate activities optimally to a given number of workstations. The objective function used in this paper is to maximize the net profit of a production Line, which comprises net revenues minus inventory holding costs and fixed costs of workstations. The design of the assembly line is affected by two decision variables: number of workstations and cycle time. Finally, it is shown that a 'balanced' line is not necessarily an optimal one and 'pushing' activities to the right (the end of the assembly line) may reduce total holding costs and improve the profitability of the line.

Faced with stochastic demand, a firm may decide to assemble its products in advance or assemble them once actual demand is realized. In general, the production cost for items assembled in advance (AIA) is lower than for items assembled to order (ATO), because there is no need to expedite, and the production process can be planned and executed well in advance. On the other hand, items assembled in advance (AIA) for which there is no demand incur excessive and unnecessary assembly costs. The two policies, AIA and ATO, as well as a composite one, are compared and analyzed in light of these trade-offs. The composite model, which is shown as the dominating policy, is also extended to deal with the following two scenarios. The first assumes a loss of a fraction of the demand when demand cannot be satisfied from the shelf but rather through ATO. The second considers the effects of budget constraints on the total inventory cost. (C) 1995 John Wiley & Sons, Inc.

A common procedure in budget allocation is to let the different entities of an organization determine their optimal budgets. Once the individual requests are received, they are then cut by a common factor, as necessary, so that a global constraint is satisfied. We refer to this procedure as the “cut across the board” rule. In general, this method will not result in a globally optimal solution. In this paper we identify conditions that assure the global optimality of die “cut (or expand) across the board” rule. We specifically focus on a constrained multi-item inventory model and generalize results of Rosenblatt [10] and Plossl and Wight [8]. In addition, we briefly discuss applicability of the results to other areas.

In this paper, we develop procedures for dividing rectangular warehouses into classes. We describe three types of classes and develop their corresponding traveling time models. A solution procedure involving a one-dimensional (or at most two-dimensional) search is developed. We show that the one-dimensional search procedure is very effective in solving most practical problems. Additionally, we show that most of the savings obtained by a full-turnover policy can be obtained with a relatively few classes-a result similar to the one obtained for the square AS/RS.

The study of Automated Storage/Retrieval Systems (AS/RS) in warehouses has developed along two main lines: One seeks to minimize total cost of an AS/RS, while the other explores the dynamic behavior of such a system. This study addressing the two issues simultaneously, obtains design parameters for a system that complies with desired levels of performance. To this end, a heuristic recursive optimization/simulation procedure is developed. It is also assumed that the number of stacker cranes (an important cost component of AS/RS) can be less than or equal to the number of aisles. The proposed procedure was applied to several situations, and converged within a few iterations.

In order to improve their service level many automated storage/retrieval systems (AS/RS) have adopted a dual command policy. In a dual command policy both storage and retrieval of pallets are done within one roundtrip of the crane. The expected travel time for a dual command policy is composed of two one-way travel time elements used for storage and retrieval, and an interleaving time element used for moving from a storage location to a retrieval location. In this study we apply the nearest-neighbour policy to a class-based warehouse in order to decrease the interleaving time. We develop the methodology for determining the interleaving time for both square and rectangular (time-wise) warehouses. We show that using the nearest-neighbour policy in a class-based environment can decrease the interleaving time, resulting in a significant increase in the total throughput.

As the world moves toward a global economy, it is increasingly important that operations management courses prepare students to address globalization issues. The purpose of this paper is to contribute to the dialog concerning how international topics are best incorporated into operations management curricula. On the basis of the results of a survey of operations management academicians worldwide, current course offerings are cataloged and topic areas critical to the globalization of operations are identified. Four major reasons for studying international operations management are proposed, which provide the basis for recommendations on how international topics can be introduced into established operations courses and for the design of an elective course in global operations. Finally, teaching materials relevant to international operations are surveyed.