Effect of delivery lead time reduction on logistic channel

Lead time has long been recognized as an important metric for assessing the performance of a business process, and delivery lead time reduction becomes resource of the strategic advantage of logistic network. This paper applies logic analysis and numerical instance to study the effect of delivery lead time reduction on a simple two-echelon decentralized logistic network. On the assumption that the variance of demand along with delivery lead time, all expected profits are expressed as the function of delivery lead time. The result shows that delivery lead time reduction always make logistic channel better off; when the service level of the logistic network isn´t more than 0.5, lead time reduction can achieve the Pareto improvement of the logistic network actor´s expected profits; when the service level of the logistic network is more than 0.5, the more delivery lead time reduction, the more expected profit of retailer is, and the less expected profit of supplier is.