The effects of work-in-process inventory costs on the design and scheduling of assembly lines with low throughput and high component costs

Abstract

This paper considers a class of assembly systems with long cycle times (low volume of output) and highly expensive components or subassemblies. Systems such as these are typical for companies in the aerospace industry assembling missiles and airplanes. As each unit of the product moves along the assembly line, its value increases owing to additional parts or components installed and the additional work performed. We show that sequencing activities according to ascending values of the ratios of the ‘value added’ to activity duration minimizes inventory holding cost within a given workstation. A branch-and-bound procedure is then used to allocate activities optimally to a given number of workstations. The objective function used in this paper is to maximize the net profit of a production line, which comprises net revenues minus inventory holding costs and fixed costs of workstations. The design of the assembly line is affected by two decision variables: number of workstations and cycle time. Finally, it is shown that a ‘balanced’ line is not necessarily an optimal one and ‘pushing’ activities to the right (the end of the assembly line) may reduce total holding costs and improve the profitability of the line.