On the benefits of pooling in production-inventory systems

Saif Benjaafar, William L. Cooper, Joon Seok Kim

Research output: Contribution to journalArticlepeer-review

50 Scopus citations

Abstract

We study inventory pooling in systems with symmetric costs where supply lead times are endogenously generated by a finite-capacity production system. We investigate the sensitivity of the cost advantage of inventory pooling to various system parameters, including loading, service levels, demand and production time variability, and structure of the production system. The analysis reveals differences in how various parameters affect the cost reduction from pooling and suggests that these differences stem from the manner in which the parameters influence the induced correlation between lead-time demands of the demand streams. We compare these results with those obtained for pure inventory systems, where lead times are exogenous. We also compare inventory pooling with several forms of capacity pooling.

Original languageEnglish (US)
Pages (from-to)548-565
Number of pages18
JournalManagement Science
Volume51
Issue number4
DOIs
StatePublished - Apr 2005

Keywords

  • Demand correlation
  • Inventory pooling
  • Make-to-stock queues
  • Production-inventory systems

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