IS POOLING LEAD‐TIME RISK BY SPLITTING ORDERS SIMULTANEOUSLY WORTHWHILE? |
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| Authors: | Douglas J. Thomas Ph.D. John E. Tyworth Ph.D. |
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| Affiliation: | 1. Pennsylvania State University;2. Douglas J. Thomas: (Ph.D., Georgia Institute of Technology) is Assistant Professor of Supply Chain Management in the Smeal College of Business at the Pennsylvania State University. He received his MS and Ph.D. in Industrial Engineering from the Georgia Institute of Technology and his BS in Operation Research from Cornell University. Dr. Thomas's research interests include performance measurement in inventory systems, extended enterprise production planning and the use of real time information in inventory and transportation management. His work has appeared in leading academic and practitioner journals in the areas of logistics and operations management.;3. John E. Tyworth: (Ph.D., University of Oregon) is Professor of Supply Chain Management in the Smeal College of Business at the Pennsylvania State University. He received his MBA and Ph.D. in Logistics from the Lundquist College, University of Oregon. He also holds a BA in Economics from the University of California, Santa Barbara. Dr. Tyworth serves as Chair of the Supply Chain and Information Systems Department and Director of Research for the Center of Supply Chain Research. His research has appeared regularly in leading academic and practitioner journals for more than 25 years. |
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| Abstract: | A large body of research is based on the proposition that pooling lead‐time risk by splitting orders simultaneously can offer significant opportunities to reduce inventory system costs. This paper investigates that proposition for a broad range of industry conditions, as well as for a high‐tech company in a global setting. The investigation considers important cost elements not included in previous work to conduct a realistic assessment of the value proposition. The results indicate that, even under favorable conditions, the proposition is worthwhile only when lead‐time variability and unit values are unusually high. Managerial implications and new research directions are discussed in light of these findings. |
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| Keywords: | Inventory Lead Time Logistics Order Splitting Pooling Risk Procurement Purchasing Safety Stock Supply Chain Transportation |
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