Valuation of Leadtime Reduction in Multi-Stage Production Systems

Projects for leadtime reduction in production system have to be evaluated economically with respect to their impact on logistic costs and customer service. In this paper a procedure for valuation of these effects is presented taking into consideration uncertainty in customer demands as well as in manufacturing leadtimes. This procedure can be applied to general multi-stage production systems with convergent or divergent structure and can be used as a helpful tool for assessing the cost/service performance of investments in reducing length and variability of leadtime in complex production systems.