A Supply Planning Model for Multilevel Assembly Systems Under Random Lead Times

Abstract

A multilevel assembly system with one type of finished product and several types of components is considered. The component lead times for components at each period are independent random variables, and the demand of finished product per period is constant. Finished products should be delivered by the end of each period. Otherwise a backlogging cost is incurred. Components necessary to assemble the same semi-finished product that are delivered in advance will cause holding cost. The objective is to find the optimal release dates (safety lead times which is measured in number of periods) for the components in order to minimize the total expected costs composed of the finished product backlogging cost and the component holding cost. We propose a model that gives the optimal release dates values for the components.