A solution for the intractable inventory model when both demand and lead time are stochastic

Jack C. Hayya, Terry P. Harrison and Dean C. Chatfield

International Journal of Production Economics, 2009, vol. 122, issue 2, 595-605

Abstract: We consider the reorder point, order quantity inventory model where the demand, D, and the lead time, L, are independently and identically distributed (iid) random variables. This model is analytically intractable because of order crossover. However, we show how to resolve the intractability by empirical means, for example, by regression relationships produced by simulation and factorial experiments. Using a normal approximation, we show how to obtain regression equations for the optimal cost and the optimal policy parameters (here the order quantity and the safety stock factor) in terms of the problem parameters (ordering cost per order, holding cost per unit per unit time, shortage cost per unit, the standard deviation of demand, and the standard deviation of lead time).

Keywords: iid; random; variables; Lead; time; Demand; Inventory; Order; crossover; Shortage; cost; measure (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925-5273(09)00189-3
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:122:y:2009:i:2:p:595-605

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().