Supply Lead Time Research Articles

Procurement under uncertain supply lead times — A dual- sourcing technique could save costs

Inventory system costs tend to be higher if uncertainty prevails in the supply lead times and consequently in the demand during the lead time because of the possibility of shortages or the need to maintain larger safety stocks. In this paper we explore a dual-sourcing technique in which the replenishment order quantity for the inventoried item with stochastic lead times is split between two sources of supply, and split-orders are placed simultaneously. It is shown that this results in effective lead times with lower variability and hence savings in the inventory holding and shortage costs are possible. If these savings exceed the incremental ordering costs associated with procurement from two sources overall cost economies result. In this paper, the theoretical concepts underlying the dual-sourcing technique and its implications for implementation in procurement management are presented along with an overview of the recent research in the area of dual sourcing.

A Model for Assessing the Value of Warehouse Risk-Pooling: Risk-Pooling Over Outside-Supplier Leadtimes

This paper constructs and analyzes a multi-location inventory model to examine the value of warehouse risk-pooling in high service-level systems. Specifically, risk-pooling over the outside-supplier leadtime is examined. Two alternative systems of N identical retailers are formulated. In System 1, each retailer operates independently: retailers receive goods directly from an outside supplier after a fixed leadtime (Ls + Ltr), where Ls is the outside supplier's own (e.g., manufacturing) leadtime and Ltr is the transportation/receiving leadtime to the retailers. In System 2, the system order is shipped to a warehouse, arriving after a fixed leadtime (Ls + Ltw), where Ltw is the transportation/receiving leadtime to the warehouse. Upon receipt of the goods, the warehouse allocates and ships units to the retailers to equalize their inventory positions. The warehouse does not hold inventory. Allocation and reshipment in System 2 requires a fixed leadtime of (Lpw + Ltr) time periods, where Lpw is the allocation and (re)packaging leadtime at the warehouse. Hence, System 2 pools risk over the outside supplier leadtime, but at the cost of: (1) increased overall leadtime to the retailers; and (2) an ‘internal’ pipeline inventory holding cost. Our analysis asks the question: given equal required service-levels and equal safety stock holding cost (plus pipeline inventory cost for System 2), how large can System 2's extra leadtimes (Ltw, Lpw) be? Our analysis concludes that pipeline inventory-holding cost significantly influences the overall value of these breakeven leadtimes. Specifically, when pipeline inventory holding costs can (somehow) be ignored, the corresponding breakeven leadtimes can be quite large. However, if these costs cannot be avoided, then the corresponding breakeven leadtimes are significantly reduced. Managerial interpretations are provided.

Component Inventory Costs in an Assembly Problem with Uncertain Supplier Lead-Times

We present a generic study of inventory costs in a factory stockroom that supplies component parts to an assembly line. Specifically, we are concerned with the increase in component inventories due to uncertainty in supplier lead-times, and the fact that several different components must be present before assembly can begin. It is assumed that the suppliers of the various components are independent, that the suppliers' operations are in statistical equilibrium, and that the same amount of each type of component is demanded by the assembly line each time a new assembly cycle is scheduled to begin. We use, as a measure of inventory cost, the expected time for which an order of components must be held in the stockroom from the time it is delivered until the time it is consumed by the assembly line. Our work reveals the effects of supplier lead-time variability, the number of different types of components, and their desired service levels, on the inventory cost. In addition, under the assumptions that inventory holding costs and the cost of delaying assembly are linear in time, we study optimal ordering policies and present an interesting characterization that is independent of the supplier lead-time distributions.

Just‐in‐time Manufacturing

Just‐in‐time manufacturing is a Western adaptation of an influential Japanese idea: the existence of inventory is a way of covering up inefficiencies of procurement, production and marketing. JIT in a western context will often be an extension of the advanced manufacturing techniques introduced in recent years, including computer‐based management methodologies, such as MRP‐II. The steps necessary to establish a JIT environment are indicated, with emphasis on the strategies which overcome the four classic problems of manufacturing management: excessive supplier lead times, inflexible production planning, large batch sizes and long queue times. The article provides an in‐depth discussion on the development of closer customer‐supplier relationships, one of the major bases of JIT. For JIT to function effectively, production planning must be accurate, timely and flexible and the best way of achieving that is with a closed‐loop MRP‐II computerised management system.

OR contributions to flexibility improvement in production/inventory systems

Recently the notion of flexibility (especially with respect to Flexible Manufacturing Systems) has attracted considerable attention of OR workers. The majority of the contributions is focussed on operational aspects of production systems. A further very important issue concerns the design of production systems and investment decisions with respect to these systems. The aim of this paper is to illustrate how OR models can contribute to quantify effects of, for instance, investment in set-up time reduction or investment in supply leadtime reduction on logistic performance of production systems. Of course there are many more opportunities to improve logistic performance. The approach in this paper offers the opportunity to quantify the integral effects of these improvements and shows the direction for logistic innovation. In this way both design of production systems and quality of related investment decisions can be improved significantly. Some simple examples are worked out in order to illustrate the ideas and to give impetus for further research in this field.

Managing Supplier Leadtime

Journal of Purchasing and Materials ManagementVolume 15, Issue 2 p. 2-7 Article Managing Supplier Leadtime C. David Wieters, C. David WietersSearch for more papers by this author C. David Wieters, C. David WietersSearch for more papers by this author First published: 01 June 1979 https://doi.org/10.1111/j.1745-493X.1979.tb00439.xCitations: 4AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Citing Literature Volume15, Issue2Summer 1979Pages 2-7 RelatedInformation