Maximizing Effectiveness Using a Flexible Inventory

Abstract

Although uncertainty in production and inventory systems is not desirable, predictions for demand are inherently uncertain. When the set of products is complex, that is, composed of multiple subassemblies, and there are shared subassemblies amongst different product types, the option for storing partially completed assemblies may also help in meeting demand uncertainties. Furthermore, as new technology is developed and new models are added to the inventory, older models can sometimes be upgraded to add the new functionality and increase the overall effectiveness of the inventory in meeting demand. Thus, when faced with uncertain demand for one or more products over a geographically distributed domain, the set of recourses for a manufacturer/planner include excess production (inventory storage), rapid re-location of inventory, production surges, when to upgrade technology or procure new models, what level of assembly to store the products, and where to store these, as well as in what quantities and ratios of product types. Factors affecting these decisions are manpower availability, budgets, ease of upgrade, cost of new procurements, and probabilities of demand realization. This paper explores related decision models in the context of the torpedo enterprise. Solutions of mathematical models are illustrated and features of some of the models leading to specific solution algorithms highlighted. Simulations to assess the utility of the solutions obtained by analytical methods are also presented.