Dynamic Re-order Point Inventory Control with Lead-Time Uncertainty: Analysis and Empirical Investigation

Mohamed Zied Babai (1) , Aris A Syntetos (1) , Yves Dallery (2) , Kostantinos Nikolopoulos (3)

1 Salford Business School
2 LGI - Laboratoire Génie Industriel - EA 2606
3 MBS - Manchester Business School

A new forecast-based dynamic inventory control approach is discussed in this paper. In this approach, forecasts and forecast uncertainties are assumed to be exogenous data known in advance at each period over a fixed horizon. The control parameters are derived by using a sequential procedure. The merits of this approach as compared to the classical one are presented. We focus on a single-stage and single-item inventory system with non-stationary demand and lead-time uncertainty. A dynamic re-order point control policy is analysed based on the new approach and its parameters are determined for a given target cycle service level (CSL). The performance of this policy is assessed by means of empirical experimentation on a large demand data set from the pharmaceutical industry. The empirical results demonstrate the benefits arising from using such a policy and allow insights to be gained into other pertinent managerial issues.

Mots clés: Physical Sciences

Mohamed Zied Babai, Aris A Syntetos, Yves Dallery, Kostantinos Nikolopoulos. Dynamic Re-order Point Inventory Control with Lead-Time Uncertainty: Analysis and Empirical Investigation. International Journal of Production Research, 2009, 47 (09), pp.2461-2483. ⟨10.1080/00207540701666824⟩. ⟨hal-00513006⟩