Stochastic Leadtimes in Two-Level Assembly Systems

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Abstract Shortages of assembly parts often arise from late arrivals of one or more batches of components. We address the problem of determining planned leadtimes in two-level assembly systems with stochastic leadtimes, with the objective of minimizing the sum of inventory holding costs and tardiness costs. An algorithm is developed which exploits properties of the objective function to find optimal solutions. Computational results indicate that optimal solutions often have negative safety times for at least one of the components, as well as substantial safety times for the assembly stage.