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The safety stock and inventory cost paradox in a stochastic lead time setting

Disney, Stephen Michael, Maltz, Arnold, Wang, Xun and Warburton, Roger 2015. The safety stock and inventory cost paradox in a stochastic lead time setting. Presented at: 26th Production and Operations Management Society Annual Conference, Washington, WA, 8-11 May 2015.

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We study a stochastic lead-time problem motivated by real world global shipping data. Replenishment quantities are generated by the Order-Up-To policy which aims to achieve a strategic availability target. We show that unlike the constant lead-time case, minimum safety stocks do not always lead to minimum costs under stochastic lead-times.

Item Type: Conference or Workshop Item (Paper)
Date Type: Completion
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Uncontrolled Keywords: order up to policy, stochastic lead time, order crossover
Date of First Compliant Deposit: 30 March 2016
Last Modified: 10 Oct 2017 16:15

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