Combined demand and lead time uncertainty with back-ordering in a multi-level product structure environment

The performance of two lot-sizing algorithms incorporating back-orders is evaluated and compared with several traditional lot-sizing rules. This comparison is undertaken for a multi-level product structure environment operating under a rolling horizon in the presence of both demand and lead time uncertainties. By means of simulation and statistical analysis of the simulation output, the impact on system performance of a variety of demand and lead time scenarios, product structures, cost parameters and lot-sizing, is evaluated. The conclusions drawn emphasize important differences in the influence of the factors on system performance given the presence or absence of uncertainty.