The Effects of Lead Time Variability on Managing Component Replenishment for Customized Manufacturing

We study the impact of lead time variability on inventory management in a make-to-order system that processes customized manufacturing using a common component. Components are purchased from a supplier with Erlang lead times. In this paper, we investigate the structure of the optimal replenishment policy and examine how the lead time variability affects replenishment decision and supply chain cost. Explicit incorporation of setup cost and lead time variability into the model is the essential contribution to the current literature. To provide better managerial insights on the problem, we perform numerical experiment under different operating conditions of the system parameters.