Inventory management with variable lead-time dependent procurement cost

A reduction in the inventory replenishment lead-time allows reducing safety stock requirements and improving customer service. However, it might be accompanied by increased procurement costs because of premium charges imposed by suppliers, or higher transportation costs. This paper studies a single-...

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Bibliographic Details
Published inOmega (Oxford) Vol. 36; no. 5; pp. 877 - 887
Main Authors Chandra, Charu, Grabis, Jānis
Format Journal Article
LanguageEnglish
Published Exeter Elsevier Ltd 01.10.2008
Elsevier
Elsevier Science Publishers
Pergamon Press Inc
SeriesOmega
Subjects
Applied sciences
Business planning
Business plans
Costs
Exact sciences and technology
Inventory
Inventory control
Inventory control Variable lead-time Sensitivity analysis
Inventory control, production control. Distribution
Inventory management
Management
Methods
Operational research and scientific management
Operational research. Management science
Optimization
Purchasing
Sensitivity analysis
Studies
Variable lead-time
United States
Inventory control
Sensitivity analysis
Variable lead-time
Procurement
Refeeding
Time allowed
Distribution cost
Safety stock
Modeling
Optimization
Lead time
Time dependence
User service
Replenishment
Safety requirement
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Summary:A reduction in the inventory replenishment lead-time allows reducing safety stock requirements and improving customer service. However, it might be accompanied by increased procurement costs because of premium charges imposed by suppliers, or higher transportation costs. This paper studies a single-stage variable lead-time inventory system with lead-time dependent procurement cost. Selection of the lead-time value represents finding the trade-off between benefits of lead-time reduction and increase in the procurement cost. A model for joint optimization of inventory and procurement costs is developed. Numerical studies are conducted to identify conditions under which lead-time reduction is favorable compared to procuring at the lowest cost.
ISSN:0305-0483
1873-5274
DOI:10.1016/j.omega.2006.04.009