Decision support for lead time and demand variability reduction
Companies undertaking operations improvement in supply chains face many alternatives. This work seeks to assist practitioners to prioritize improvement actions by developing analytical expressions for the marginal values of three parameters – (i) lead time mean, (ii) lead time variance, and (iii) demand variance – which measure the marginal cost of an incremental change in a parameter. The relative effectiveness of reducing lead time mean versus lead time variance is captured by the ratio of the marginal value of lead time mean to that of lead time variance. We find that this ratio strongly depends on whether the lead time mean and variance are independent or correlated. We illustrate the application of the results with a numerical example from an industrial setting. The insights can help managers determine the optimal investment decision to modify demand and supply characteristics in their supply chain, e.g., by switching suppliers, factory layout, or investing in information systems.
Volume (Year): 41 (2013)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Silver, Edward A. & Bischak, Diane P., 2011. "The exact fill rate in a periodic review base stock system under normally distributed demand," Omega, Elsevier, vol. 39(3), pages 346-349, June.
- Hau L. Lee & Kut C. So & Christopher S. Tang, 2000. "The Value of Information Sharing in a Two-Level Supply Chain," Management Science, INFORMS, vol. 46(5), pages 626-643, May.
- Jayashankar M. Swaminathan & Sridhar R. Tayur, 2003. "Models for Supply Chains in E-Business," Management Science, INFORMS, vol. 49(10), pages 1387-1406, October.
- Marshall Fisher & Kumar Rajaram & Ananth Raman, 2001. "Optimizing Inventory Replenishment of Retail Fashion Products," Manufacturing & Service Operations Management, INFORMS, vol. 3(3), pages 230-241, November.
- Chandra, Charu & Grabis, Janis, 2008. "Inventory management with variable lead-time dependent procurement cost," Omega, Elsevier, vol. 36(5), pages 877-887, October.
- Silver, Edward A. & Robb, David J., 2008. "Some insights regarding the optimal reorder period in periodic review inventory systems," International Journal of Production Economics, Elsevier, vol. 112(1), pages 354-366, March.
- Gerchak, Yigal & Parlar, Mahmut, 1991. "Investing in reducing lead-time randomness in continuous-review inventory models," Engineering Costs and Production Economics, Elsevier, vol. 21(2), pages 191-197, May.
- Sridhar Bashyam & Michael C. Fu, 1998. "Optimization of (s, S) Inventory Systems with Random Lead Times and a Service Level Constraint," Management Science, INFORMS, vol. 44(12-Part-2), pages 243-256, December.
- He, Xin James & Kim, Jeon G. & Hayya, Jack C., 2005. "The cost of lead-time variability: The case of the exponential distribution," International Journal of Production Economics, Elsevier, vol. 97(2), pages 130-142, August.
- Bookbinder, James H. & Cakanyildirim, Metin, 1999. "Random lead times and expedited orders in (Q,r) inventory systems," European Journal of Operational Research, Elsevier, vol. 115(2), pages 300-313, June.
- Wei Shi Lim, 2001. "Producer-Supplier Contracts with Incomplete Information," Management Science, INFORMS, vol. 47(5), pages 709-715, May.
- Hau L. Lee & V. Padmanabhan & Seungjin Whang, 1997. "Information Distortion in a Supply Chain: The Bullwhip Effect," Management Science, INFORMS, vol. 43(4), pages 546-558, April.
- Hayya, Jack C. & Harrison, Terry P. & He, X. James, 2011. "The impact of stochastic lead time reduction on inventory cost under order crossover," European Journal of Operational Research, Elsevier, vol. 211(2), pages 274-281, June.
- Hosoda, Takamichi & Disney, Stephen M., 2012. "A delayed demand supply chain: Incentives for upstream players," Omega, Elsevier, vol. 40(4), pages 478-487.
- Garcia, C.A. & Ibeas, A. & Herrera, J. & Vilanova, R., 2012. "Inventory control for the supply chain: An adaptive control approach based on the identification of the lead-time," Omega, Elsevier, vol. 40(3), pages 314-327.
- Wu, Jianghua & Zhai, Xin & Huang, Zhimin, 2008. "Incentives for information sharing in duopoly with capacity constraints," Omega, Elsevier, vol. 36(6), pages 963-975, December.
- Silver, Edward A., 1992. "Changing the givens in modelling inventory problems: the example of just-in-time systems," International Journal of Production Economics, Elsevier, vol. 26(1-3), pages 347-351, February.
- Jing-Sheng Song & Candace A. Yano & Panupol Lerssrisuriya, 2000. "Contract Assembly: Dealing with Combined Supply Lead Time and Demand Quantity Uncertainty," Manufacturing & Service Operations Management, INFORMS, vol. 2(3), pages 287-296, July.
- Paknejad, M. Javad & Nasri, Farrokh & Affisco, John F., 1992. "Lead-time variability reduction in stochastic inventory models," European Journal of Operational Research, Elsevier, vol. 62(3), pages 311-322, November.
- Fu, Yonghui & Piplani, Rajesh, 2004. "Supply-side collaboration and its value in supply chains," European Journal of Operational Research, Elsevier, vol. 152(1), pages 281-288, January.
- Ryu, Si Wook & Lee, Kyung Keun, 2003. "A stochastic inventory model of dual sourced supply chain with lead-time reduction," International Journal of Production Economics, Elsevier, vol. 81(1), pages 513-524, January.
When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:41:y:2013:i:2:p:390-396. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If references are entirely missing, you can add them using this form.