We develop a continuous review inventory model where lead-time is considered as a controllable variable. Lead-time is decomposed into all its components: set-up time, processing time and non-productive time. These components reflect the set-up cost reduction, lot size lead-time interaction and lead-time crashing, respectively. The learning effect in the production process is also included in the processing time component of the lead-time. The finite investment approach for lead-time and set-up cost reduction and their joint optimization, in addition to the lot size lead-time interaction, introduce a realistic direction in lead-time management and control. A numerical example and a sensitivity analysis are presented using the design of experiments to investigate the effect of the model parameters and, in particular, those related to the different lead-time components on the the expected total cost.
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Document Type: Research Article
Systems Engineering Department, King Fahd University of Petroleum and Minerals, Dhahran, 31261 Saudi Arabia
Mechanical Engineering Department, College of Engineering, King Saud University, PO Box 800, Riyadh 11421, Saudi Arabia
Publication date: 01 January 2003
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