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Analysis of the effect of commonality in multi-level inventory systems applying MRP theory

Analysis of the effect of commonality in multi-level inventory systems applying MRP theory

Zhou, Li ORCID: 0000-0001-7132-5935 and Grubbström, Robert W. (2004) Analysis of the effect of commonality in multi-level inventory systems applying MRP theory. International Journal of Production Economics, 90 (2). pp. 251-263. ISSN 0925-5273 (doi:10.1016/S0925-5273(03)00208-1)

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Abstract

Commonality, i.e. using the same type of component in different locations of product structure trees, is frequently encountered in manufacturing industries. It has long been known that using a common component can reduce the cost of safety stock. Basically, taking commonality into account can reduce the inventory level, shorten the time for reaching the market, decrease the set-up time, increase productivity, and improve flexibility. However, using the same component in different locations might require that the component is made more flexible and, therefore, more expensive as compared to choosing tailor-made items for its respective locations. The manufacturing cost of commonality items may therefore be much higher because of its greater number of functions. So, there may be a balance to be struck between the value of the advantage of commonality, and the cost of its disadvantage. This paper focuses on the effect of commonality in multi-level production–inventory systems, especially assembly systems. The basic balance equations of
MRP theory, using input–output analysis together with the Laplace transform, are used for comparing the cases when
commonality is disregarded, on the one hand, and when commonality is taken into account, on the other. Applying the net present value as the objective function, conclusions are derived in the form of conditions for when commonality is recommended, and when not.

Item Type: Article
Uncontrolled Keywords: commonality, production-inventory system, material requirements planning (MRP), input–output analysis, Laplace transform
Subjects: H Social Sciences > HD Industries. Land use. Labor
Faculty / Department / Research Group: Faculty of Business > Supply Chain Management Research Group
Related URLs:
Last Modified: 14 Oct 2016 09:21
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
URI: http://gala.gre.ac.uk/id/eprint/8358

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