Supply Lead Time Uncertainty in a Sustainable Order Quantity Inventory Model

Received: 10 September 2013 Abstract Accepted: 5 November 2013 Transport plays a key role in inventory management since it affects logistic costs as well as environmental performance of the supply chain. Expected value and variability of supply lead time depend on the transportation means adopted, and influence the optimal values of order quantity, reorder level, and safety stock to be adopted. Fast transportation means allow reducing expected value of the lead time; they are characterized by the highest costs of externalities (i.e. air pollutant emission, noise, congestion, accidents). On the contrary, slow transportation means require high inventory level due to large order quantity; in this case costs of externalities tend to decrease. The Sustainable Order Quantity (SOQ) [1] allows identifying optimal order quantity, reorder level, safety stock as well as transportation means which minimize the sum of the logistic and environmental costs in case of stochastic variability of product demand. In this paper, the authors propose a new SOQ analytical model considering stochastic variability of supply lead time (LT). A solution procedure is suggested for solving the proposed model. The approach is applied to a real industrial case study in order to evaluate the benefits of applying it if compared with the traditional one.