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Inventory control with seasonality of lead times

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  • Riezebos, Jan
  • Zhu, Stuart X.

Abstract

The practical challenges posed by the seasonality of lead times have largely been ignored within the inventory control literature. The length of the seasons, as well as the length of the lead times during a season, may demonstrate cyclical patterns over time. This study examines whether inventory control policies that anticipate seasonal lead-time patterns can reduce costs. We design a framework for characterizing different seasonal lead-time inventory problems. Subsequently, we examine the effect of deterministic and stochastic seasonal lead times within periodic review inventory control systems. We conduct a base case analysis of a deterministic system, enabling two established and alternating lead-time lengths that remain valid through known intervals. We identify essential building blocks for developing solutions to seasonal lead-time problems. Lastly, we perform numerical experiments to evaluate the cost benefits of implementing an inventory control policy that incorporates seasonal lead-time lengths. The findings of the study indicate the potential for cost improvements. By incorporating seasonality in length of seasons and length of lead times within the season into the control models, inventory controllers can make more informed decisions when ordering their raw materials. They need smaller buffers against lead-time variations due to the cyclical nature of seasonality. Reductions in costs in our experiments range on average between 18.9 and 26.4% (depending on safety time and the probability of the occurrence of stock out). Therefore, inventory control methods that incorporate seasonality instead of applying large safety stock or safety time buffers can lead to substantial cost reductions.

Suggested Citation

  • Riezebos, Jan & Zhu, Stuart X., 2020. "Inventory control with seasonality of lead times," Omega, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:jomega:v:92:y:2020:i:c:s0305048318313665
    DOI: 10.1016/j.omega.2019.102162
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