The Joint Effect of Leadtime Variance and Lot Size in a Parallel Processing Environment

Jing-Sheng Song and Paul H. Zipkin
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Jing-Sheng Song: Department of Industrial Engineering and Operations Research, Columbia University, New York, New York 10027
Paul H. Zipkin: The Fuqua School of Business, Duke University, Durham, North Carolina 27708-0120

Management Science, 1996, vol. 42, issue 9, 1352-1363

Abstract: We study a basic (r, q) system, in which the demand is a Poisson process and the leadtimes are independent, identically-distributed random variables. The key issue is the joint effect of the leadtime variance and the lot size q on performance. We know that, under a simple base-stock policy (with q = 1), the leadtime variance has no effect at all. We find here that, for larger q, the leadtime variance can have a significant adverse impact on performance. To explore this effect, we test two simple approximations. The simplest ignores the leadtime variance. The second approach is only a bit more complex; it captures the variance effect through a hybrid of two limiting approximations. Both methods provide useful information, but the second is more robust.

Keywords: (r; q) inventory model; stochastic leadtimes; heavy traffic approximation; lot size; leadtime variance (search for similar items in EconPapers)
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:42:y:1996:i:9:p:1352-1363

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