Evaluation of Component Commonality Strategies in Supply Chain Environment

This paper evaluates three component commonality strategies in supply chain environment: Distinctive Part (DP), Pure Component Commonality (PCC), and Mixed Component Commonality (MCC) strategies. DP is where all products consist of distinctive parts and no common component is used, while PCC is where one or more parts from different products are completely replaced by common components. In MCC, unlike PCC, it allows partial substitution of distinctive parts with common components. We develop models to analyze these strategies for both the constant and stochastic demands. The solution to minimizing the total inventory cost is presented. For constant demand, MCC is the worst choice and PCC is the best for the case of low common component price, high ordering cost, or high interest rate. For stochastic demand, PCC is the best for the case of low common component price, high demand variation, high ordering cost, long lead time, or high interest rate. However, MCC can be used to reduce inventory cost if the demand variation is high. Other conditions for the appropriateness of MCC are also discussed.