Inventory Control when the Lead-time Changes

Abstract

A single-echelon inventory system with continuous review and Poisson demand is considered. There are standard linear holding and backorder costs but no ordering or set-up costs. We study a change in the lead-time, which is rather typical in connection with application of a Just-In-Time philosophy. Our main focus is a lead-time decrease but we also consider a lead-time increase. Due to the lead-time change, the optimal steady state solution will also, in general, change. We consider the transient problem of minimizing the costs when bringing the system from its original steady state to the new steady state