Lead time in Safety Stock Optimization

The following topics describe how lead time is used in Safety Stock Optimization:

• Lead time outputs
• Lead time variability in multi-echelon inventory optimization
• Cross period lead time

Lead time inputs

Lead time in Safety Stock Optimization is the lead time per order. It represents how long it takes to get products once an order is placed, and this is dependent of the order size.

Safety Stock Optimization converts the lead time inputs to the lead time demand mean and lead time demand standard deviation. For lead times, you can specify a fixed number or a normal distribution. When specifying a normal distribution, you enter a normal distribution in the format N(mean,std dev), or use the distribution field builder on the lead time column to define the distribution. Safety Stock Optimization uses only normal distribution, even though the field builder offers other types of distribution. If you use an alternate type of distribution for lead time, you need to calculate the mean and standard deviation for that lead time profile. For example, if you used an exponential distribution of EXP(5), the mean is 5 and the standard deviation is 5. You could then enter a lead time of N(5,5) to get the same results as EXP(5) would produce.