Authors: Adriano Solis, Charles Schmidt
This study involves the introduction of stochastic leadtimes between the warehouse and retail sites, in place of the original deterministic leadtimes in an earlier reported multi-echelon inventory model. We had previously investigated analytically the effects of stochastic leadtimes on required retailer base stock levels when the warehouse does not carry stock (e.g., serves as a cross-dock point). The current paper examines the effects of stochastic leadtimes in the traditional situation where the warehouse does carry stock. The model becomes mathematically intractable, and simulation studies become appropriate. A heuristic involving simulation experiments is devised for selecting a base stock policy, taking off from solutions to the deterministic leadtime model. Resulting average system inventory is found equal or very close to the optimal level. Our study suggests that the optimal solution to the deterministic leadtime case provides an appropriate starting point in searching for a solution in the stochastic leadtime case.