COMPONENT COMMONALITY EFFECTS ON INVENTORY COSTS

In this paper we study the effects of increasing component commonality for a single-period model. A two-product, two-level configuration und er a general component cost structure is considered. The economic impl ications of replacing different products' components by common compone nts are analyzed. We develop optimal solutions for the Commonality and Non-Commonality (Basic) Models and provide bounds on the total saving s resulting from using commonality. We demonstrate, under general and specific component cost structures, that some forms of commonality may not always be a preferred strategy. Furthermore, we present condition s under which commonality should not be used. Finally, an extension to the two-product multicomponent model is provided.