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AN ALTERNATE MODEL FOR LEAD‐TIME DEMAND: CONTINUOUS‐REVIEW INVENTORY SYSTEMS
Author(s) -
Carlson Phillip G.
Publication year - 1982
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1982.tb00135.x
Subject(s) - lead time , reorder point , exponential function , poisson distribution , mathematical optimization , computer science , lead (geology) , on demand , exponential growth , mathematics , economics , statistics , operations management , economic order quantity , mathematical analysis , supply chain , multimedia , geomorphology , political science , law , geology
The calculation of reorder points when the distribution of lead‐time demand is normal is quite complex, primarily because of having to bound it away from negative demand values. A number of researchers have sought feasible alternative forms of lead‐time demand which can be calculated without undue difficulty. It is proposed here to assume a Poisson (daily) demand and an exponential lead time (days). If they are assumed independent their convolution is geometric, which is itself asymptotically exponential. This has a number of advantages: (1) The exponential lead time is appropriate where the lead time is often short (i.e., local source), occasionally longer (when the local sources stock out), and, infrequently, quite long. (2) The geometric lead‐time demand is independent of changes of time scale. (3) Reorder points and lot sizes appear in simple closed form. (4) The exponential asymptote is sufficiently close that this further simplification is usually warranted.