A cost allocation model for optimizing the inventory of a supply chain with controllable lead time

In most Supply chain management researches, lead time is considered as a predetermined and fixed parameter. In recent years, some researchers are motivated to consider controllable lead time as a decision variable but they have only considered single product and two-echelon supply chains. This paper proposes a cost allocation model considering the elements of a three echelon supply chain consists of a retailer, a manufacturer and a distributor with multiple products and controllable lead time. After presenting a case with independent decision making and ordering policy by each member, a model will be proposed in which all of the elements of the supply chain are cooperating with each other and have a unique ordering policy. The proposed model will determine the optimal order quantity in the mentioned situation. Finally, we will examine the proportion of the crashing lead time related costs that each part of the chain should pay in order to make the group decision making beneficiary for all of the chain members. [Rashed Sahraeian 1 , Mehdi Koosha. A cost allocation model for optimizing the inventory of a supply chain with controllable lead time. Journal of American Science 2011; 7(11): 216-222]. (ISSN: 15451003).