Expected time delay in multi-item inventory systems with correlated demands

Abstract

This paper considers multi-item inventory systems where a customer order may require several different items (i.e., demands are correlated across items) and customer satisfaction is measured by the time delays seen by the customers. Most inventory models on time delay in the literature assume each demand only requires one item (i.e., demands are not correlated across items or are independent). In this paper, we derive an exact expression for the expected total time delay. We show that when items are actually correlated, assuming items are independent leads to an overestimate of the total time delay. However, (1) it is extremely difficult in practice to obtain the demand information for all demand types (especially in a system with tens of thousands of part numbers), and (2) the problem becomes too complicated to be of practical interest when the correlation is considered. We then explore the possibility of including the demand information partially and develop bounds for the time delays. © 1999 John Wiley & Sons, Inc. Naval Research Logistics 46: 671–688, 1999Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/35020/1/5_ftp.pd