A Model which Translates the Batch Size Decision into a Set of Rate of Return Distributions for Captive or Non-captive Demand

Abstract

Delays at machines have effects on the timing of input costs as well as on the delivery time of the product. Here we examine a simple model which combines both these effects and represents the inventory decision as a rate of return distribution for each element being produced. A useful concept of equivalent money leadtime is introduced and under simple assumptions is employed to produce the above rate of return distribution. The calculation procedure is indicated but this does not appear to be simple, particularly for joint distributions of stage delays. Finally two sets of simulated results are included to demonstrate the convergence of the two cases (captive and non-captive) as the reorder level is increased.