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The impact of lead time reliability in freight transport: A logistics assessment of transport economics findings

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  • Dullaert, Wout
  • Zamparini, Luca

Abstract

This paper considers speed and reliability, measured by the average and variance of the lead time, to examine the relevance of the latter variable on inventory costs. By using a flexible simulation framework, it is shown that reducing variability does not necessarily reduce costs and might in fact increase the costs of safety stock, depending on the shape of the demand distribution during lead time and the targeted service level. This offers a novel explanation for the wide variety of value of reliability figures obtained in empirical transport economics research.

Suggested Citation

  • Dullaert, Wout & Zamparini, Luca, 2013. "The impact of lead time reliability in freight transport: A logistics assessment of transport economics findings," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 49(1), pages 190-200.
    • Handle: RePEc:eee:transe:v:49:y:2013:i:1:p:190-200
    DOI: 10.1016/j.tre.2012.08.005
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    9. Tyworth, John E. & Saldanha, John, 2014. "The lead-time reliability paradox and inconsistent value-of-reliability estimates," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 76-85.
    10. Juan Manuel Izar Landeta & Carmen Berenice Ynzunza Cortés & Orlando Guarneros García, 2016. "Lead time demand variability, safety stock and the inventory cost," Contaduría y Administración, Accounting and Management, vol. 61(3), pages 499-513, Julio-Sep.
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    13. Gumuskaya, Volkan & van Jaarsveld, Willem & Dijkman, Remco & Grefen, Paul & Veenstra, Albert, 2020. "Dynamic barge planning with stochastic container arrivals," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 144(C).
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