Dual Sourcing in an Assembly System: A Simple and Effective Critical-Set Base-Surge Policy

To enhance supply chain resilience, assembly manufacturers increasingly adopt dual-sourcing strategies, utilizing both regular and faster but costlier express sources for each key component. Although research has focused on single-item systems, coordinating dual-sourced orders across multiple components in an assembly system remains underexplored. To address this gap, we introduce a novel Critical-Set Base-Surge (CSBS) policy, which combines a constant order policy for regular sources to meet base demand with a Critical-Set (CS) policy for express sources to handle surge demand. Under the CS policy, only components within a “critical set” are replenished from the express sources, raising their net inventory levels to a common threshold. By uncovering a weaker form of additive separability and demonstrating the exponential convergence of states under the CSBS policy, we establish a theoretical bound on its performance and demonstrate its asymptotic optimality as regular lead times increase. The results can be extended to settings where only a subset of components is dual-sourced. Numerical experiments show that, compared with benchmark policies that apply the Tailored Base-Surge policy, the CSBS policy achieves substantial optimality gap reductions. Furthermore, we propose a CSBS policy with easy-to-compute parameters and demonstrate that it delivers performance comparable with the CSBS policy.

Funding: Financial support from the National Natural Science Foundation of China [Grants 72525012, 72501166, 72310107001, 72188101, and 72531005] and the Program for Innovative Research Team of Shanghai University of Finance and Economics is gratefully acknowledged.

Supplemental Material: All supplemental materials, including the code, data, and files required to reproduce the results, are available at https://doi.org/10.1287/opre.2023.0411.