Exploiting Random Lead Times for Significant Inventory Cost Savings

Abstract

Taking Advantage of the Lead Time Randomness in Supply Chains Randomness in lead times is a major—and increasingly important—issue of inventory management, as a variety of risk factors motivate companies to diversify their supply sources and rely on distributed networks of suppliers. In “Exploiting Random Lead Times for Significant Inventory Cost Savings,” A. Stolyar and Q. Wang show that, surprisingly, instead of being a damaging factor to supply chain performance, randomness may be harnessed for potentially very substantial reductions of inventory costs. Specifically, the theoretical analysis and simulation results in the paper demonstrate that, under certain conditions, appropriately designed novel policies can significantly outperform the conventional base stock policies.