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The impact of supply chain visibility when lead time is random

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Abstract

We study the impact of supply chain visibility on periodic review inventory control, by studying its effect on lead time, where lead time is assumed to be random. We break down the total lead time from a supplier to a retailer into individual smaller lead times, as the product is tracked moving from one intermediary location to another. (This can be achieved, for example, through the use of RFID technology.) Under optimality, we observe that the average expected cost per cycle that the retailer can achieve in the long run given supply chain visibility is no worse than that for the base periodic review model without such visibility. An example is given which shows that there is indeed cost savings in the former, as compared with the base model. Further numerical results are then given to quantify the benefits of supply chain visibility on retailer’s cost with defined simple lead-time distributions. We also report on any trends that might appear as input parameters are varied in the numerical experiments.

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Authors and Affiliations

  1. Department of Industrial and Systems Engineering, National University of Singapore, Block E1A, 1 Engineering Drive 2, 06-25, Singapore, 117576, Singapore

    Ek Peng Chew & Loo Hay Lee

  2. Department of Applied Mathematics, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong

    Chee-Khian Sim

Authors
  1. Ek Peng Chew
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  2. Loo Hay Lee
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  3. Chee-Khian Sim
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Correspondence to Chee-Khian Sim.

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Chew, E.P., Lee, L.H. & Sim, CK. The impact of supply chain visibility when lead time is random. OR Spectrum 35, 163–190 (2013). https://doi.org/10.1007/s00291-011-0254-3

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  • DOI: https://doi.org/10.1007/s00291-011-0254-3

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