Assemble-to-order system
In applied probability, an assemble-to-order system is a model of a warehouse operating a build to order policy where products are assembled from components only once an order has been made.
The time to assemble a product from components is negligible, but the time to create components is significant.
Research typically focuses on finding good policies for inventory levels and on the impact of different configurations. The special case of only one product is an assembly system, the case of just once component is a distribution system.
Model definition
Single period model
This case is a generalisation of the newsvendor model. The problem involves three stages and we give one formation of the problem belowWe use the following notation
Symbol | Meaning |
m | total number of components |
n | total number of products |
aij | units of component i required to make one unit of product j |
dj | demand for product j |
yi | supply for component i |
pj | penalty cost for unit shortage of product j |
hi | cost for unit excess of component i |
zj | production level of product j |
wj | shortage of product j |
xi | excess of component i |
In the final stage when demands are known the optimization problem faced is to
and we can therefore write the optimization problem at the first stage as
with x0 representing the starting inventory vector and c the cost function for acquiring the components.