The impact of delivery lot splitting on delivery reliability in a two-stage supply chain

Abstract

Current supply chain policies are increasingly influenced by the lean philosophy, which calls for increased synchronization and smaller but more frequent shipments between the supply chain partners. One of the strategies used in this respect is lot splitting, i.e. the splitting of a single order quantity among multiple deliveries. Lot splitting is known to offer numerous advantages over a lot-for-lot policy, such as decreasing flow times and lower congestion levels. In this paper, we prove analytically that lot splitting improves the delivery reliability of the supplier, and hence the production schedule stability of the buyer. We also propose an approximation to estimate the delivery reliability in terms of the lot splitting policy and the system characteristics.