Optimizing inventory strategy for modular shipbuilding

Abstract

The primary drivers for buying a ship from a certain yard are price, delivery time and quality. In order to decrease construction time and costs, shipbuilding companies are exploring the development of product-families to include family wide modularity and cross family standardization. Standardization is the use of identical components across multiple products, while modularity combines parts to create 'building-blocks'. This creates an opportunity for less inventory, a more efficient supply chain and shorter delivery times. Considering a network of suppliers and shipyards, the shipbuilder has to answer the following question: Which components and pre-assembled modules should be available in which inventory? Since the exact ship orders are not known, this can be seen as an optimization problem with uncertainty. To solve it, it is formulated as an integer linear program (ILP), and to handle the uncertainty, the Sampling Average Approximation (SAA) method is used. Several smaller instances are solved to optimality by Gurobi optimization software and the performance of this approach is evaluated along with the convergence of the SAA method. The results show convergence of the SAA method although only relatively small instances can be solved to optimality by the ILP.