Supplier Selection Model Development for Modular Product with Substitutability and Controllable Lead Time

Abstract

Modular product patterns supported by production systems should be able to cope with the high demand for product variations. In the products that have modular patterns, some components of the module compilers with the other module have the same function/use (commonality) and will be able to mutually replace one another (substitutability). On the other hand, changing in the strategic industrial environments have led to the increases of competition, changes in market structure and increases of consumer bargaining power. Changes in consumer needs are then captured by various companies which led to the concept of mass customization. In this paper we aim to develop a mathematical model that can minimize the total inventory cost to select a single supplier and determine the optimum inventory policy considering the nature of commonality and substitutability between components with controllable lead time.