The Effect Of Lead-Time On The Supply Chain: The Mean Versus The Variance
AbstractIn a study on stochastic inventory systems, Chopra et al. (Decision Sciences 35(1) (2004) 1–24) argue that decreasing lead time is the right lever if they want to cut inventories, not reducing lead time variability. According to Chopra et al., reducing the mean lead time, μ, is more important than reducing the lead time variance, σ2, to reduce total inventory cost via a reduced safety stock. This paper is a criticism of Chopra et al., where the optimal z was derived based upon a predetermined Q, instead of solving the optimal z and Q simultaneously in a (z, Q) inventory system. We argue that such an approach is inappropriate because the two decision variables, z and Q, are in general interdependent, and, moreover, reducing reorder point (safety stock), z, does not necessarily decrease the total inventory cost. We demonstrate by means of a truncated lead time (z, Q) model that it is lead time variability, not mean lead time, that affects the inventory policy and total supply chain cost.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Information Technology and Decision Making.
Volume (Year): 10 (2011)
Issue (Month): 01 ()
Contact details of provider:
Web page: http://www.worldscinet.com/ijitdm/ijitdm.shtml
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Luminiţa Nicolescu & Cristina Galalae & Alexandru Voicu, 2013. "Solving a Supply Chain Management Problem to Near Optimality Using Ant Colony Optimization, in an International Context," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 15(33), pages 8-26, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.