Conditional Lead-Time Flexibility in an Assemble-to-Order System

Author:

Yu Yi1ORCID,Deng Tianhu2ORCID,Song Jing-Sheng3ORCID

Affiliation:

1. School of Information Management and Engineering, Shanghai University of Finance and Economics, Shanghai 200433, China;

2. Department of Industrial Engineering, Tsinghua University, Beijing 100084, China;

3. Fuqua School of Business, Duke University, Durham, North Carolina 27708

Abstract

Problem definition: We introduce and formalize a concept termed conditional lead-time flexibility (CLF), which refers to the industry practice where a manufacturer requests that its upstream suppliers dynamically adjust the pipeline orders’ remaining lead times. Over a finite horizon, an assemble-to-order manufacturer makes joint decisions on inventory replenishment and lead-time adjustment to minimize the total discounted expected cost. Methodology/results: The problem is formulated as a multiperiod dynamic programming with an enlarged state space to track the adjustable pipeline orders. The replenishment and lead-time adjustment decisions are made sequentially in each period. The analysis reveals that (i) the optimal cost-to-go function is both convex and additively separable, that (ii) both the optimal replenishment and lead-time adjustment decisions follow general base-stock policies, and that (iii) the convexity and additive separability allow us to perform a derivative analysis on the optimality equations and design an efficient algorithm. Managerial implications: Using real industry data, we numerically find that (i) CLF achieves notable cost savings over a wide range of parameters, that (ii) the value of CLF comes from both the order expediting and deferring, and that (iii) CLF outperforms dual sourcing when the unit adjustment cost is less than 40% of the unit ordering cost from the express source. Our findings underscore the importance of CLF. Funding: T. Deng acknowledges financial support from the National Key Research and Development Program of China [Grant 2022YFB3305602] and the National Natural Science Foundation of China (NSFC) [Grant 72188101]. Supplemental Material: The electronic companion is available at https://doi.org/10.1287/msom.2023.0520 .

Publisher

Institute for Operations Research and the Management Sciences (INFORMS)

同舟云学术

1.学者识别学者识别

2.学术分析学术分析

3.人才评估人才评估

"同舟云学术"是以全球学者为主线,采集、加工和组织学术论文而形成的新型学术文献查询和分析系统,可以对全球学者进行文献检索和人才价值评估。用户可以通过关注某些学科领域的顶尖人物而持续追踪该领域的学科进展和研究前沿。经过近期的数据扩容,当前同舟云学术共收录了国内外主流学术期刊6万余种,收集的期刊论文及会议论文总量共计约1.5亿篇,并以每天添加12000余篇中外论文的速度递增。我们也可以为用户提供个性化、定制化的学者数据。欢迎来电咨询!咨询电话:010-8811{复制后删除}0370

www.globalauthorid.com

TOP

Copyright © 2019-2024 北京同舟云网络信息技术有限公司
京公网安备11010802033243号  京ICP备18003416号-3