Strategic inventory allocation for product platform strategy

Purpose – This paper focuses on decision making related to the use of strategic inventory allocation in product platform design. The purpose of the paper is to present a novel approach to managing product variety by considering product and manufacturing strategy, and considering the supply chain benefits. Design/methodology/approach – Discrete event simulation is used for analyzing product platform performance in terms of inventory level and throughput. Simulation parameters such as lead times and safety stock allocation are optimized by using an analytical model of strategic safety stock allocation. Findings – The results show that strategic safety stock allocation supports product platform strategy by increasing production output, and reducing inventory level and customer order queues at a higher level of product variety. Research limitations/implications – Linking the safety stock allocation and product platform strategy facilitates simultaneous product and process design by providing the most optimum platform strategy at minimum safety stock allocation. Practical implications – Strategic safety stock allocation facilitates decision making with regard to lean strategy by reducing inventory level, agile strategy by increasing the amount of product variety and outputs, and responsiveness by reducing the number of customer order queues. Originality/value – The paper presents an innovative customer order decoupling point decision.