The Effect of Lead-Time Variability: The Case of Independent Demand

We show in this study, through analysis and examples, the impact on stockouts and stockout risk if the variability of lead time in independent demand systems is ignored. In calculating safety stocks, we recommend that the compound distribution of demand during lead time, or a good approximation to i...

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Main Authors: BAGCHI, Uttarayan, Hayya, Jack C., CHU, Chao-Hsien
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 1986
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Online Access:https://ink.library.smu.edu.sg/sis_research/1771
http://dx.doi.org/10.1016/0272-6963(86)90023-9
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spelling sg-smu-ink.sis_research-27702013-03-15T10:12:03Z The Effect of Lead-Time Variability: The Case of Independent Demand BAGCHI, Uttarayan Hayya, Jack C. CHU, Chao-Hsien We show in this study, through analysis and examples, the impact on stockouts and stockout risk if the variability of lead time in independent demand systems is ignored. In calculating safety stocks, we recommend that the compound distribution of demand during lead time, or a good approximation to it, be used. We motivate the article by a case study on lead-time variability at the U.S. Air Force and show the impact of lead-time variability by means of numerical examples and by marginal analysis. Having established that it is essential to consider lead-time variability, we take advantage of theoretical developments and show how to calculate reorder points and safety stocks in some common situations. It is important to use the proper form for the compound distribution of demand during lead time. A normal approximation to it will often yield significant errors. This is because the true distribution is usually very much skewed to the right. 1986-02-01T08:00:00Z text https://ink.library.smu.edu.sg/sis_research/1771 info:doi/10.1016/0272-6963(86)90023-9 http://dx.doi.org/10.1016/0272-6963(86)90023-9 Research Collection School Of Computing and Information Systems eng Institutional Knowledge at Singapore Management University Computer Sciences Management Information Systems
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Computer Sciences
Management Information Systems
spellingShingle Computer Sciences
Management Information Systems
BAGCHI, Uttarayan
Hayya, Jack C.
CHU, Chao-Hsien
The Effect of Lead-Time Variability: The Case of Independent Demand
description We show in this study, through analysis and examples, the impact on stockouts and stockout risk if the variability of lead time in independent demand systems is ignored. In calculating safety stocks, we recommend that the compound distribution of demand during lead time, or a good approximation to it, be used. We motivate the article by a case study on lead-time variability at the U.S. Air Force and show the impact of lead-time variability by means of numerical examples and by marginal analysis. Having established that it is essential to consider lead-time variability, we take advantage of theoretical developments and show how to calculate reorder points and safety stocks in some common situations. It is important to use the proper form for the compound distribution of demand during lead time. A normal approximation to it will often yield significant errors. This is because the true distribution is usually very much skewed to the right.
format text
author BAGCHI, Uttarayan
Hayya, Jack C.
CHU, Chao-Hsien
author_facet BAGCHI, Uttarayan
Hayya, Jack C.
CHU, Chao-Hsien
author_sort BAGCHI, Uttarayan
title The Effect of Lead-Time Variability: The Case of Independent Demand
title_short The Effect of Lead-Time Variability: The Case of Independent Demand
title_full The Effect of Lead-Time Variability: The Case of Independent Demand
title_fullStr The Effect of Lead-Time Variability: The Case of Independent Demand
title_full_unstemmed The Effect of Lead-Time Variability: The Case of Independent Demand
title_sort effect of lead-time variability: the case of independent demand
publisher Institutional Knowledge at Singapore Management University
publishDate 1986
url https://ink.library.smu.edu.sg/sis_research/1771
http://dx.doi.org/10.1016/0272-6963(86)90023-9
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