Parts Demand Fluctuation Control Method for ETO Production with MTS Parts

<p>　This paper focuses on Engineer-to-order (ETO) manufacturing companies that need to provide customized products, such as machine tools and elevators.</p><p>　Usually, the production lead time is significantly longer than the customers’ expected deliverylead-time. Consequently, ETO companies have to prepare parts in advance (make-to-stock parts: MTS Parts) before receiving product specifications from customers. Because customer requirements varies largely, ETO companies are forced to prepare a large variety of parts for matching customers’ diverse requirements, which further lead to high parts inventory costs. Moreover, since the demand fluctuation of each product is large, demand fluctuation of each parts is larger because of the bullwhip effect. To decrease the safety stock inventory prepared for dealing with the demand fluctuation, in this paper, parts compatibility is focused on. Instead of using the fixed parts composition for each individual product, flexible parts compositions are considered in each planning period. By checking the functional relationships among specifications of products and parts, a large combination of parts composition candidate can be listed. For each candidate, progressive average used quantity of each part is calculated, and the candidate with the smallest difference in quantity is adopted. The effect of the proposal on decreasing parts demand fluctuation is testified and confirmed.</p>