Study of the impact of discrepancies between production and distribution lot size on the service level

Abstract

Discrepancies that may occur between the production lot size and the production lot preliminarily requested by the area of logistics and the impact that these differences may have on the level of customer service are studied in this paper. We used mixed integer programming as our methodological approach and we found that although lot sizing disagreements may cause a negative impact on customer service, it should not always be associated with worsening in the service level. We found that even in scenarios of high shortage cost, with high level of service, beneficial discrepancies could appear, generating cost reductions with a constant service level. It was concluded that the concept of integration between production and distribution do not necessarily imply that any area should always do what the other define. Rather, the integration must be posed better in terms of the benefit in the global system, under which the discrepancy may have some important role.