A risk management-based approach for inventory planning of engineering-to-order production

Engineering-to-order has steadily increased shares of total production. By its own nature, the order specific products often come without pre-defined bills-of-materials which undermines the starting point of prevailing inventory planning methods. Manufacturers often have to confront with difficult, if not impossible, choices for meeting the highly responsive service level without investing in costly inventory, particularly for long lead time items. In this paper, a novel inventory planning approach is presented. Based on predetermined inventory budget, customer responsiveness can be optimized by considering risks associated with supply chain uncertainty, component commonality, substitution possibility, market intelligence, and other salient factors. (c) 2012 CIRP.