An integrated inventory model with controllable lead time and distribution‐free demand

Abstract

Abstract The impact of lead time reduction on an integrated periodic review inventory system comprising a single vendor and multiple buyers with a step crashing cost function and service‐level constraints is studied. The probability distribution of demand during the protection period for each buyer is unknown, but the mean and the variance are given. Each production lot of the vendor can be delivered in a number of shipments to all buyers. A minimax distribution‐free procedure with Lagrange multipliers is applied to determining the lead time, the common shipment cycle time, the target levels of replenishments and the number of shipments per production cycle so that the expected total system cost is minimized. Numerical experiments along with sensitivity analysis were performed to illustrate the effects of parameters on the decision and the total system cost. Copyright © 2009 John Wiley & Sons, Ltd.

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