Simulation based model for component replenishment in multi-product ATO systems with shared resources

With increasing product complexity, sophistication and customization, Assemble-to-Order (ATO) systems have gained a lot of popularity in recent years. ATO systems have the advantage of delivering customer orders at shorter leadtimes by manufacturing components to stock. However, for an on-time delivery of the final assembled product, the corresponding components must be replenished and be available when needed for assembly in a timely yet cost-effective manner. This research investigates the production and subcontracting decisions in the multi-product ATO systems. We also provide insights on resource allocation decisions among various components and how does randomness in the service times impact these decisions. Using, Monte Carlo simulation approach, we identified that when the manufacturer is cheaper the direction towards optimality is by having the threshold values kept close to the base stock level for all components.