Supply and Demand Synchronization in Assemble-to-Order Supply Chains
In this chapter, we describe a methodology for effectively synchronizing supply and demand through the integrated use of supply and demand flexibilities. While most prior literature focuses on the concept of Available-To-Promise (ATP) to determine product availability, we propose a new methodology called Available-To-Sell (ATS) that incorporates firm-driven product substitutions into capitalize on up-sell and alternative-sell opportunities in the production planning phase. ATS aims at finding marketable product alternatives that replace demand on supply-constrained products while minimizing expected stock-out costs for unfilled product demand and holding costs for leftover inventory. It enables a firm to maintain a financially viable and profitable product portfolio, taking effective actions to avoid excess component inventory, and articulating marketable product alternatives. We formulate a mathematical programming model to analyze the performance of ATS, and show how to exploit the structural properties of the model to develop an efficient solution procedure utilizing column generation techniques. The model can easily be embedded into a firm’s supply chain operations to improve day-to-day flexibility.
KeywordsMarketing Product Line Vanilla
The authors thank the two referees for their insightful comments, which have helped improve the presentation of this chapter. The authors also thank Larry Phillips, Rich Bell, Blair Binney, and Dan Peters for sharing their knowledge about demand conditioning and availability management, and Reha Uzsoy for pointing us to the literature on reverse logistics.
- Balakrishnan A, Xia Y, Zhang B (2005) “Shaping demand to match anticipated supply.” MSOM Conference 2005, Northwestern University.Google Scholar
- Ball MO, Chen CY, Zhao ZY (2004) “Available to Promise.” In: Simchi-Levi D, Wu, SD, Shen ZJ (eds). Handbook of quantitative supply chain analysis - modeling in the e-business era. Kluwer, pp. 447–480Google Scholar
- Chen-Ritzo C-H (2006) “Availability management for configure-to-order supply chain systems.” PhD Dissertation, Pennsylvania State UniversityGoogle Scholar
- Ervolina T, Dietrich B (2001) “Moving toward dynamic available-to-promise.” In: Gass S, Jones AT (eds.) Supply chain management practice and research: status and future directions pp. 1–19Google Scholar
- Ervolina T, Ettl M, Lee Y, Peters D (2006) “Simulating order fulfillment with product substitutions in an assemble-to-order supply chain.” In: Perrone LF et al. (eds.) Proceedings of the 2006 winter simulation conference. pp. 2012–2020Google Scholar
- Ettl M, Lu Y, Squillante M (2006) “Liability and serviceability trade-offs in vendor-managed inventory systems,” In: Proceedings of the 2006 M&SOM Conference, Georgia Institute of Technology, AtlantaGoogle Scholar
- Hale W, Pyke DF, Rudi N (2001) “An assemble-to-order system with component substitution.” Tuck School of Business, DartmouthGoogle Scholar
- Vollmann TE, Berry WL, Wybark DC (1997) Manufacturing planning and control systems, 4th edn. McGraw-HillGoogle Scholar