The lead-time reliability paradox and inconsistent value-of-reliability estimates

John E. Tyworth; John Saldanha

doi:10.1016/j.tre.2014.06.009

The lead-time reliability paradox and inconsistent value-of-reliability estimates

John E. Tyworth, John Saldanha

Supply Chain and Information Systems

Research output: Contribution to journal › Article › peer-review

9 Scopus citations

Abstract

The value-of-reliability (VOR) reflects the savings in inventory-system costs from more reliable (less variable) lead times. Previous studies have revealed that more reliable, but positively skewed, lead times could actually increase optimal safety inventory when the probability of satisfying all demand during a replenishment cycle drops below 70%. Researchers claim that this paradox affects most firms and that it explains the inconsistent VOR estimates found in the transportation economics literature. Our investigation reveals that firms interested in high product availability may safely ignore the paradox and that less lead-time variability consistently increases VOR, the paradox notwithstanding.

Original language	English (US)
Pages (from-to)	76-85
Number of pages	10
Journal	Transportation Research Part E: Logistics and Transportation Review
Volume	70
Issue number	1
DOIs	https://doi.org/10.1016/j.tre.2014.06.009
State	Published - Oct 2014

All Science Journal Classification (ASJC) codes

Business and International Management
Civil and Structural Engineering
Transportation

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10.1016/j.tre.2014.06.009

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The lead-time reliability paradox and inconsistent value-of-reliability estimates

Abstract

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