Abstract
We show in this study, through analysis and examples, the impact on stockouts and stockout risk if the variability of lead time in independent demand systems is ignored. In calculating safety stocks, we recommend that the compound distribution of demand during lead time, or a good approximation to it, be used. We motivate the article by a case study on lead-time variability at the U.S. Air Force and show the impact of lead-time variability by means of numerical examples and by marginal analysis. Having established that it is essential to consider lead-time variability, we take advantage of theoretical developments and show how to calculate reorder points and safety stocks in some common situations. It is important to use the proper form for the compound distribution of demand during lead time. A normal approximation to it will often yield significant errors. This is because the true distribution is usually very much skewed to the right.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 159-177 |
| Number of pages | 19 |
| Journal | Journal of Operations Management |
| Volume | 6 |
| Issue number | 2 |
| DOIs | |
| State | Published - Feb 1986 |
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All Science Journal Classification (ASJC) codes
- Strategy and Management
- Management Science and Operations Research
- Industrial and Manufacturing Engineering
Cite this
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The effect of lead-time variability : The case of independent demand. / Bagchi, Uttarayan; Hayya, Jack C.; Chu, Chao Hsien.
In: Journal of Operations Management, Vol. 6, No. 2, 02.1986, p. 159-177.Research output: Contribution to journal › Article
TY - JOUR
T1 - The effect of lead-time variability
T2 - The case of independent demand
AU - Bagchi, Uttarayan
AU - Hayya, Jack C.
AU - Chu, Chao Hsien
PY - 1986/2
Y1 - 1986/2
N2 - We show in this study, through analysis and examples, the impact on stockouts and stockout risk if the variability of lead time in independent demand systems is ignored. In calculating safety stocks, we recommend that the compound distribution of demand during lead time, or a good approximation to it, be used. We motivate the article by a case study on lead-time variability at the U.S. Air Force and show the impact of lead-time variability by means of numerical examples and by marginal analysis. Having established that it is essential to consider lead-time variability, we take advantage of theoretical developments and show how to calculate reorder points and safety stocks in some common situations. It is important to use the proper form for the compound distribution of demand during lead time. A normal approximation to it will often yield significant errors. This is because the true distribution is usually very much skewed to the right.
AB - We show in this study, through analysis and examples, the impact on stockouts and stockout risk if the variability of lead time in independent demand systems is ignored. In calculating safety stocks, we recommend that the compound distribution of demand during lead time, or a good approximation to it, be used. We motivate the article by a case study on lead-time variability at the U.S. Air Force and show the impact of lead-time variability by means of numerical examples and by marginal analysis. Having established that it is essential to consider lead-time variability, we take advantage of theoretical developments and show how to calculate reorder points and safety stocks in some common situations. It is important to use the proper form for the compound distribution of demand during lead time. A normal approximation to it will often yield significant errors. This is because the true distribution is usually very much skewed to the right.
UR - http://www.scopus.com/inward/record.url?scp=38249041627&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=38249041627&partnerID=8YFLogxK
U2 - 10.1016/0272-6963(86)90023-9
DO - 10.1016/0272-6963(86)90023-9
M3 - Article
AN - SCOPUS:38249041627
VL - 6
SP - 159
EP - 177
JO - Journal of Operations Management
JF - Journal of Operations Management
SN - 0272-6963
IS - 2
ER -