Optimal Policy for a Two-Stage Assembly System under Random Demand

Charles P. Schmidt and Steven Nahmias
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Charles P. Schmidt: University of Alabama, University, Alabama
Steven Nahmias: The University of Santa Clara, Santa Clara, California

Operations Research, 1985, vol. 33, issue 5, 1130-1145

Abstract: This paper considers an inventory system in which an end product is assembled from two components, each of which is ordered from an external supplier. Only the end product has final demand, which is assumed to be random. Using the functional equation approach of dynamic programming, we characterize the forms of both the optimal order policy for the components and the optimal assembly policy of the end product for a multiperiod problem of arbitrary, but finite length. We believe that this work represents the only exact analysis of an MRP-type assembly system when demand is stochastic.

Keywords: 362 component ordering and product assembly; 629 two-stage production assembly (search for similar items in EconPapers)
Date: 1985
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Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:33:y:1985:i:5:p:1130-1145

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