Inventory Calculation for an Item Supplied by Three Providers with Stochastic Lead Times

This study aims to answer whether the policy of a business that is supplied by 3 different providers and with random patterns of their lead times is optimal or should be modified. The lead times are normal, the first one, uniform the second one and exponential the third. The three lead times have the same average value of eight days, with the objective of making a comparison of them. There is a restriction on the minimum service level, it has to be 95% or greater. The objective is to define the order quantity, the reorder point, and the fraction that should be ordered from each supplier to minimize inventory costs. The item has a normally distributed demand. Results were achieved by simulation that was made in Excel. The current policy of obtaining a third of the complete order from each supplier is satisfactory; however, it doesn´t produce the optimal cost, since lower-cost options were found. A sensitivity analysis was conducted to establish how inventory costs are affected by the variation of some parameters. The third supplier, with exponential pattern of lead time showed the highest variance of delivery time; thus, it has been the least recommended, since it has been the option with the highest cost.