Development of a novel lot sizing model with variable lead time in supply chain environment

Abstract

Supply chain management (SCM) addresses the management of materials and information across the entire chain from suppliers to producers, distributors, retailers, and customer. The theory of supply chain management suggests that lead time reduction is a pioneer to the use of market mediation to reduce transaction uncertainty in the chain, which can be conceptualized as the primary goal of supply chain management. In the past few decades, scholars gave ample attention about the impact of inventory on SCM. This paper relates to the development of a lot sizing model for a single component multiple delivery system with variable demand and lead time of a multinational transformer company. Two models and the modification were developed on the basis of the following assumptions. For first model distribution of demand is normal, distribution of procurement lead time is exponential and the quantity is coming in a single lot. For second model distribution of demand is normal distribution of ‘procurement’ and ‘administrative delay’ lead time is exponential and the quantity is coming in a single lot. Modification of the first model has been done by taking the effect of multiple deliveries in the models and correcting the Re-order point as obtained from the previous models. The results were observed by the second model and analysis has been done for different parametric conditions. The effect of multiple deliveries is also taken into account. The optimum re-order point and economic ordering quantity with various different inputs have been discussed.

Keywords

• SCM (Supply Chain Management)
• Lot size
• Economic Order Quality (EOQ)
• Lead time
• ROP ( Re-order point)