Quantifying the Value of Single-Location

This article studies the value of leadtime information in a single-location inventory model with a Markovian leadtime process. The optimal strategy under complete leadtime information (i.e., the leadtime state is observable) is a base-stock policy with the order-up-to level dependent on the leadtime state. The optimal base-stock level for each leadtime state can be computed in an iterative manner. The optimal strategy under incomplete leadtime information (i.e., only part of the realized leadtime process is observable) represents a signi¯cant challenge. Tight bounds for this case are provided. Numerical examples show that the value of leadtime information can be signi¯cant.