Title
Lot sizing and lead time decisions in production/inventory systems
Author
Faculty/Department
Faculty of Sciences. Mathematics and Computer Science
Publication type
article
Publication
Amsterdam ,
Subject
Economics
Mathematics
Source (journal)
International journal of production economics. - Amsterdam
Volume/pages
155(2014) , p. 351-360
ISSN
0925-5273
ISI
000341466000037
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
Traditionally, lot sizing decisions in inventory management trade-off the cost of placing orders against the cost of holding inventory. However, when these lot sizes are to be produced in a finite capacity production/inventory system, the lot size has an important impact on the lead times, which in turn determine inventory levels (and costs). In this paper we study the lot sizing decision in a production/inventory setting, where lead times are determined by a queueing model that is linked endogenously to the orders placed by the inventory model. Assuming a continuous review (s, S) inventory policy, we develop a procedure to obtain the distribution of lead times and the distribution of inventory levels, when lead times are endogenously determined by the inventory model. This procedure allows to determine the optimal inventory parameters within the class of (s, S) policies that minimize the expected ordering and inventory related costs over time. We numerically show that ignoring the endogeneity of lead times may lead to inappropriate lot sizing decisions and significantly higher costs. This cost discrepancy is very outspoken if the lot size based on the economic order quantity deviates significantly from desirable production lot sizes. In these cases, the endogenous treatment of lead times is of particular importance. (C) 2014 Elsevier B.V. All rights reserved.
Full text (open access)
https://repository.uantwerpen.be/docman/irua/d73ef1/8694.pdf
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