Lead-time reduction in a stochastic inventory system with learning consideration

Lead-time reduction in a stochastic inventory system with learning consideration

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Article ID: iaor20032646
Country: United Kingdom
Volume: 41
Issue: 2
Start Page Number: 571
End Page Number: 579
Publication Date: Jan 2003
Journal: International Journal of Production Research
Authors: ,
Abstract:

We develop a continuous review inventory model where lead-time is considered as a controllable variable. Lead-time is decomposed into all its components: set-up time, processing time and non-productive time. These components reflect the set-up cost reduction, lot size lead-time interaction and lead-time crashing, respectively. The learning effect in the production process is also included in the processing time component of the lead-time. The finite investment approach for lead-time and set-up cost reduction and their joint optimization, in addition to the lot size lead-time interaction, introduce a realistic direction in lead-time management and control. A numerical example and a sensitivity analysis are presented using the design of experiments to investigate the effect of the model parameters and, in particular, those related to the different lead-time components on the expected total cost.

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