Joint Order Fulfillment and Inventory Management in Assemble-to-Order Generalized W Systems
Man Yu, Shaohui Zheng, Jiguang Chen
Operations Research · 2025 · Volume 73 · Issue 4
Abstract
This paper characterizes joint order fulfillment and inventory policies for assemble-to-order generalized W systems, in which k products are assembled from a common component and k product-specific (dedicated) components. We consider a periodic-review system and focus on nested fulfillment policies, in which orders are fulfilled in decreasing order of profit margins. We prove that the optimal fulfillment policy of a two-product W system is nested. For systems with more than two products, although nested policies may not be optimal in general, we identify a sufficient condition for the optimal policy to be nested, and furthermore, we show that a nested policy is asymptotically optimal in a high-demand regime. Based on these results, we develop an asymptotically optimal strategy for the joint fulfillment and inventory decision under which the policy for demand fulfillment is static nested and that for inventory procurement is of the newsvendor type. In addition, we derive insights regarding the interactions between the component inventories and find that although the inventories of the common component and a particular dedicated component are complementary, those of different dedicated components may not be substitutable. Funding: The work of M. Yu was partially supported by the Hong Kong Research Grant Council [Grants 16502018 and 647312]. The work of S. Zheng was partially supported by the Hong Kong Research Grant Council [Grant 16502621]. The work of J. Chen was partially supported by the National Natural Science Foundation of China [Grants 72171202 and 72232007]. Supplemental Material: All supplemental materials, including the code, data, and files required to reproduce the results, are available at https://doi.org/10.1287/opre.2021.0281 .
Keywords
Operations and Supply Chains, assemble to order, generalized W system, dynamic order fulfillment, nested policy
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