Strategic inventory allocation for product platform strategy

Abstract

Purpose

This paper focuses on decision making related to the use of strategic inventory allocation in product platform design. The purpose of the paper is to present a novel approach to managing product variety by considering product and manufacturing strategy, and considering the supply chain benefits.

Design/methodology/approach

Discrete event simulation is used for analyzing product platform performance in terms of inventory level and throughput. Simulation parameters such as lead times and safety stock allocation are optimized by using an analytical model of strategic safety stock allocation.

Findings

The results show that strategic safety stock allocation supports product platform strategy by increasing production output, and reducing inventory level and customer order queues at a higher level of product variety.

Research limitations/implications

Linking the safety stock allocation and product platform strategy facilitates simultaneous product and process design by providing the most optimum platform strategy at minimum safety stock allocation.

Practical implications

Strategic safety stock allocation facilitates decision making with regard to lean strategy by reducing inventory level, agile strategy by increasing the amount of product variety and outputs, and responsiveness by reducing the number of customer order queues.

Originality/value

The paper presents an innovative customer order decoupling point decision.

Citation

Kristianto, Y., Helo, P. and Takala, J. (2010), "Strategic inventory allocation for product platform strategy", Journal of Advances in Management Research, Vol. 7 No. 2, pp. 233-249. https://doi.org/10.1108/09727981011085011