THE EFFECTS OF WORK-IN-PROCESS INVENTORY COSTS ON THE DESIGN AND SCHEDULING OF ASSEMBLY LINES WITH LOW THROUGHPUT AND HIGH COMPONENT COSTS

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