Inventory control with manufacturing lead time flexibility

In this paper we discuss an inventory control problem where manufacturing lead times can be shortened in case short-term stockouts are foreseen. This problem occurs in many practical situations where multiple items are produced in a production department using common capacity and customer lead time for the items is positive. In that case the common capacity provides the flexibility of scheduling in production orders of items for which a stockout occurs within the customer lead time, while scheduling out production orders for items that have sufficient stock available to satisfy short-term demand. We derive expressions for the probability of a stockout and the fill rate in case such replanning is allowed. We validate the heuristic analysis of the model by comparing model results with results from a case study. We discuss the importance of measuring the frequency of replanning for the application of the model.