Modeling Product Reconfiguration At Distribution Center Level

Abstract

Scope and method of study: This study focused on recognizing, understanding, and modeling product reconfiguration. Product reconfiguration is a process by which an in-stock product is reconfigured to meet the demand of an out-of-stock product with which it shares common parts or kits. The donor product consumes in-stock service-kit(s) for the reconfiguration process and releases kit(s) that can be used in other reconfigurations. Product reconfiguration can be employed by enterprises striving for mass customization with off-shore manufacturing facilities and local-to-demand Distribution Centers (DC). We modeled the reconfiguration process using single period Network Flow based and Integer Programming (IP) formulations and developed a prototype Decision Support System (DSS) that interfaces with the optimization models. Product reconfiguration is a relatively new field and published literature is limited. Our modeling approaches contribute to this field by providing insight into the product reconfiguration process at DC level.Findings and Conclusions: The models aid in making reconfiguration decisions by optimally deciding which product is to be reconfigured to which other product and by consuming which kit(s). The IP formulation is an aggregate planning model and the network flow based formulation specifies which kit inventory to consume. Post processing algorithms were necessary to construct reconfiguration decisions from the solution to the network flow model. The DSS acts as an interface between the model data and optimization software; final reconfiguration decision from the network model is also displayed in the DSS. This research has established the need for and the applicability of optimization models in the product reconfiguration context; it has also highlighted the importance of a DSS in supporting reconfiguration operations and in developing and refining the underlying decision-making models.