Publication Type
Journal Article
Version
acceptedVersion
Publication Date
4-2013
Abstract
Companies undertaking operations improvement in supply chains face many alternatives. This work seeks to assist practitioners to prioritize improvement actions by developing analytical expressions for the marginal values of three parameters – (i) lead time mean, (ii) lead time variance, and (iii) demand variance – which measure the marginal cost of an incremental change in a parameter. The relative effectiveness of reducing lead time mean versus lead time variance is captured by the ratio of the marginal value of lead time mean to that of lead time variance. We find that this ratio strongly depends on whether the lead time mean and variance are independent or correlated. We illustrate the application of the results with a numerical example from an industrial setting. The insights can help managers determine the optimal investment decision to modify demand and supply characteristics in their supply chain, e.g., by switching suppliers, factory layout, or investing in information systems.
Keywords
Supply chain management, Inventory, Decision analysis, Lead time, Marginal value
Discipline
Business | Operations and Supply Chain Management
Research Areas
Operations Management
Publication
Omega
Volume
41
Issue
2
First Page
390
Last Page
396
ISSN
0305-0483
Identifier
10.1016/j.omega.2012.03.005
Publisher
Elsevier
Citation
FANG, Xin; ZHANG, Cheng; ROBB, David J.; and BLACKBURN, Joseph D..
Decision Support for Lead Time and Demand Variability Reduction. (2013). Omega. 41, (2), 390-396.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/4390
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.omega.2012.03.005