The Significance of Correlated Demands and Variable Lead Times for Stock Control Policies

Abstract

The current assumptions in stock control policies of independent demands and constant lead times are relaxed to include the case of first order autoregressive demand patterns and three different distributions of lead time. It is shown that where there is negative serial correlation, assumption of independence might lead to over provision of stock, whereas in cases of positive correlation the under provision will be very significant. This is aggravated as the expected lead time increases. These effects are illustrated by some numerical results.