Calculating safety stocks for assembly systems with random component procurement lead times: A branch and bound algorithm

In this paper, a discrete single-level multi-component inventory control model for assembly systems with random component procurement lead times is considered. The economic order quantity (EOQ) policy is used for a type of finished product. The requirements of the components are constant and cyclic (periodic), and their values per period are deduced from the EOQ for the finished product. The paper focuses on the components safety stock calculation. The objective is to minimise the average holding cost of the components while keeping the desired service level for the finished product. For this, an upper bound, two lower bounds, two dominance properties and an efficient branch and bound algorithm are suggested. Several tests are executed and conclusions are drawn. The proposed model provides a substantial saving for assembly systems with a large number and unreliable delivery of components as in semi-conductor and automotive industries.