Management of a high mix production system with interdependent demands : finished goods requirements and raw materials control

Abstract

A product line, characterized by high level of customization, diversification and demand correlation between different finished goods products, requires increased efficiency and effectiveness. The product line, along with the intrinsic correlation, is modeled; the customer expectation is also analyzed. Based on these analyses, two inventory control frameworks are proposed: a fixed service level policy for the raw materials and an optimized policy for the finished goods. The optimal policy is validated using simulation. The proposed policies reduce the inventory value on hand for finished goods and raw materials by 35% and 30%, respectively, while at the same time optimizing the service levels.