Title: Periodic review base-stock replenishment policy with endogenous lead times
Authors: Boute, Robert
Lambrecht, Marc
Van Houdt, B
Issue Date: 2004
Publisher: K.U.Leuven - Departement toegepaste economische wetenschappen
Series Title: DTEW Research Report 0448 pages:1-31
Abstract: In this paper, we consider a two stage supply chain where the retailer's inventory is controlled by the periodic review, base-stock level (R,S) replenishment policy and the replenishment lead times are endogenously generated by the manufacturer's production system with finite capacity. We extend the work of Benjaafar and Kim (2004) who study the effect of demand variability in a continuously reviewed base-stock policy with single unit demands. In our analysis, we allow for demand in batches of variable size, which is a common setting in supply chains. A procedure is developed using matrix analytic methods to provide an exact calculation of the lead time distribution, which enables the computation of the distribution of lead time demand and consequently the safety stock in an exact way instead of using approximations. Treating the lead time as an endogenous stochastic variable has a substantial impact on safety stock. We numerically show that the exogenous lead time assumption may dramatically degrade customer service.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center for Operations Management, Leuven

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