Abstract
In most models of inventory systems with uncertain demands, inventory serves as a hedge against demand variability during a re-order leadtime — if replenishment were instantaneous, there would be no need to hold inventory. But the leadtime itself is generally not modeled in detail; rather, it is commonly represented by a fixed interval or, when it is taken to be stochastic, independent of the rest of the model. In some settings — for example when the leadtime is primarily due to transportation delays — a simple such model may be a fair representation of reality. But leadtimes can arise not only from external factors like transportation, but also from congestion effects internal to the operation of a system. In particular, when limits on production capacity are significant, the primary delay in replenishing stock may be due to backlogs in production created by the replenishment orders themselves, rather than to any external mechanism. In the terminology of Svoronos and Zipkin [33], leadtimes are endogenous to the model in such settings.
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Glasserman, P. (1999). Service Levels and Tail Probabilities in Multistage Capacitated Production-Inventory Systems. In: Tayur, S., Ganeshan, R., Magazine, M. (eds) Quantitative Models for Supply Chain Management. International Series in Operations Research & Management Science, vol 17. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-4949-9_3
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