Joint optimization of lot-sizes, safety stocks and safety lead times in an MRP system

This paper reports on a simulation study of an MRP system affected by stochastic demand and stochastic lead times. Experiments are conducted to assess the impact of three data sets: the amount of lead time variability, the amount of demand variability, and the influence of the stockout cost/inventory holding cost ratio. Lot-sizes, safety stocks and lead times are optimized using simulated annealing. The effects of either using safety stocks or safety lead times are compared to each other with the purpose of finding the best method for protection against uncertainties in lead time and demand.