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 under a general component cost structure is considered. The economic implications of replacing different products' components by common components are analyzed. We develop optimal solutions for the Commonality and Non-Commonality (Basic) Models and provide bounds on the total savings 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 conditions under which commonality should not be used. Finally, an extension to the two-product multicomponent model is provided.