Order allocation model in assemble-to-order system with unreliable components

Order allocation among member enterprises of a horizontal conglomerate is the key problem when the conglomerate headquarters is responsible for obtaining all market orders. Considering stochastic characteristic of component defects in assemble-to-order, a mixed integer linear programming model for order allocation with multi-order, multi-product, multi-period, and multi-manufacture was proposed. The constraint conditions of the model are capacity limitations, material balance equations, and order quantities limitations. The objective function of the model consists of assembling costs, transportation costs and shortage penalty costs. The model is tested by a simulation of an example.