Lead Time Reduction
Replenishment and lead time decisions in manufacturer–retailer chains
Shu-Lu Hsu a,*, Chun Chen Lee b a Department of Management Information Systems, National Chiayi University, Taiwan b Department of Accounting, Soochow University, Taiwan Department of Management Information Systems, National Chiayi University, 580 Sinmin Rd.,
Chiayi 600, Taiwan a r t i c l e i n f o
Article history:
Received 17 June 2008
Received in revised form 6 September 2008
Accepted 13 October 2008
Keywords:
Inventory
Integrated model
Lead time
Distribution free demand a b s t r a c t
This study investigates the decisions of replenishment and lead-time reduction for a singlemanufacturer multiple-retailer integrated inventory system in which the probability distribution of demand for each retailer is unknown but its mean and variance are given. A decision model is presented and a minimax distribution free procedure is applied to determine the lead time, the common shipment cycle time, the target levels of replenishments and the number of shipments per production cycle so that the expected total system cost can be minimized. A decision support system has been implemented on a personal computer to illustrate the application of the model.
2008 Elsevier Ltd. All rights reserved.
1. Introduction
Many companies have recognized the significance of response time as a competitive weapon and have used time as a means of differentiating themselves in the marketplace. Lead time is the elapsed time between releasing an order and receiving it. By shortening lead time, suppliers can lower the safety stock, reduce the out-of-stock loss, and improve the customer service level. In many literatures, lead time is regarded as a decision variable and can be shortened at an extra crashing cost.
Liao and Shyu (1991) first developed an inventory model in which lead time was the unique decision variable. Ben-Daya and
Raouf (1994) extended the previous model by including both lead time
Shu-Lu Hsu a,*, Chun Chen Lee b a Department of Management Information Systems, National Chiayi University, Taiwan b Department of Accounting, Soochow University, Taiwan Department of Management Information Systems, National Chiayi University, 580 Sinmin Rd.,
Chiayi 600, Taiwan a r t i c l e i n f o
Article history:
Received 17 June 2008
Received in revised form 6 September 2008
Accepted 13 October 2008
Keywords:
Inventory
Integrated model
Lead time
Distribution free demand a b s t r a c t
This study investigates the decisions of replenishment and lead-time reduction for a singlemanufacturer multiple-retailer integrated inventory system in which the probability distribution of demand for each retailer is unknown but its mean and variance are given. A decision model is presented and a minimax distribution free procedure is applied to determine the lead time, the common shipment cycle time, the target levels of replenishments and the number of shipments per production cycle so that the expected total system cost can be minimized. A decision support system has been implemented on a personal computer to illustrate the application of the model.
2008 Elsevier Ltd. All rights reserved.
1. Introduction
Many companies have recognized the significance of response time as a competitive weapon and have used time as a means of differentiating themselves in the marketplace. Lead time is the elapsed time between releasing an order and receiving it. By shortening lead time, suppliers can lower the safety stock, reduce the out-of-stock loss, and improve the customer service level. In many literatures, lead time is regarded as a decision variable and can be shortened at an extra crashing cost.
Liao and Shyu (1991) first developed an inventory model in which lead time was the unique decision variable. Ben-Daya and
Raouf (1994) extended the previous model by including both lead time