Article ID: | iaor19951220 |
Country: | Netherlands |
Volume: | 15 |
Issue: | 2 |
Start Page Number: | 85 |
End Page Number: | 93 |
Publication Date: | Mar 1994 |
Journal: | Operations Research Letters |
Authors: | Song Jing-Sheng |
This paper explores qualitative effects of lead-time uncertainty in a basic continuous-time single-item inventory model with Poisson demand and stochastic lead times. The objective is to minimize the infinite-horizon expected total discounted cost. Order costs are linear, so a base-stock policy is optimal. Traditionally and intuitively, people believe that a (stochastically) longer lead time results in a larger lead-time demand and therefore that the system should have a higher optimal base-stock level. In fact, Song shows that this is true for models with the