On the refinement of the variable lead time/constant demand lot-sizing model: The effect of true average inventory level on the traditional solution

This paper considers lot-sizing situations where lead time is allowed to vary in accordance with a known, discrete probability distribution. The demand during lead time is assumed to be constant. This paper refines the traditional analysis approach to redefining the base average inventory to account for lower average values under conditions of stockouts. An inventory-level correction factor is introduced that results in order quantity polynomials. Differences in lot-sizing policies between the two methods are enumerated, as are conditions where the two approaches yield approximately the same results.