Lead time uncertainty with back-ordering in multi-level product structures

Abstract

The performance of lot sizing algorithms incorporating back-orders is evaluated and compared with several of the traditional lot sizing rules. This comparison is undertaken for a multi-level product structure environment operating under a rolling horizon in the presence of lead time uncertainty. By means of simulation, the impact of a variety of lead time scenarios, product structures and cost parameters on lot sizing is examined. It is shown that unlike in the deterministic environment, the back-ordering algorithms can yield superior performance in an uncertain environment.