Inventory management in a multi-plant reality: the role of component commonality

Recent years have been characterized by increasing global competition towards a greater variety of products to satisfy specific customer needs. Products that require high customization and, at the same time, a good level of service through reduced delivery times, usually, are managed by companies through an Assemble to Order strategy, where stocks are kept at the level of semi- finished products. High customization levels correspond to the need to manage a significant number of components, a factor that leads to increasing costs and complexity in production. Implementing component commonality principles, in which a single component is used for multiple finished products, allows greater customization while maintaining the internal complexity of the production process at a lower level. Similarly, the aggregation of offers from multiple suppliers allows the production system to reduce the risk pooling, in terms of variability and uncertainty of the lead time. The combination of the two effects reduces the amount of safety stocks necessary to guarantee the same service level by reducing the two main components of variability (i.e., lead time and number of products) and improving demand forecasting performance. This study defines the optimal management of safety stocks for semi- finished products, to guarantee an appropriate service level while minimizing the related costs. Based on forecasted demand, the application case results confirm how the commonality component is a valid technique for reducing the necessary safety stock levels, with decreases of about 20% and 26% for the years 2023 and 2024, respectively.