This paper investigates the continuous review inventory model involving variable lead time with partial backorders, where the amount received is uncertain. The options of investing in ordering cost reduction is included, and lead time can be shortened at an extra crashing cost. The objective of this article is to simultaneously optimize the order quantity, reorder point, ordering cost and lead time. We first assume that the lead time demand follows a normal distribution and develop an algorithm to find the optimal solution. Then, we relax the assumption of normality to consider a distribution free case where only the mean and standard deviation of lead time demand are known. We apply the minimax distribution free procedure to solve this problem. For both cases, we also show that the objective cost function to be minimized is jointly convex in the decision variables. Furthermore, two numerical examples are given to illustrate the results.
Quality & Quantity – Springer Journals
Published: Dec 30, 2004
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