Fangruo Chen

Quantifying the value of leadtime information in a single-location inventory system

Coauthor(s): Bin Yu.

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Abstract:
This article studies a single-location inventory model with random leadtimes. Inventory is replenished by a single supplier who, at the time a replenishment order is received, knows exactly when the order will be delivered. In other words, the supplier knows the leadtime for every replenishment order. Suppose the single-location inventory system is managed by a retailer. The objective of this article is to quantify the value of the information about leadtimes to the retailer. This is achieved by considering and comparing the performances of two scenarios whether or not the supplier shares his leadtime information with the retailer. Numerical evidence suggests that the value of leadtime information can be significant.

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