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| A single period assemble-to-order system consisting of a manufacturer and three suppliers was considered. The manufacturer produces two different types of correlated end products, each product needs a different mix of a common set of component parts, which belong to two types, one type is specific components and the other is common components. How to manage inventories of components in such a system is of managerial interest. We formulate the inventory management problem for the system as a two-stage stochastic nonlinear integer program. We prove the decomposition of total expected profit function and give two algorithms. We solve the first stage of the problem to determine the optimal stock levels of the components by algorithm 2 and solve the second stage problem by algorithm 1, where the component allocation decisions are made. At last, we give a numerical example. |
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| Keywords: Assemble-to- order, inventory (stock) management, optimal stock levels |
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