Reduction Lead Time in Two-Echelon Supply Chain and Related Cost Study

On the basis of comprehensive analysis of the lead-time (LT) of supply chain (SC) and the research of the interrelated cost, with setting related assumptions, the model of lead-time reduction and related costs that faces the two-echelon supply chain composed of manufacturers and suppliers is established. Finally, it is concluded that the total cost in the two-echelon supply chain is the convex function of the lead time. Besides, the total cost will be obtained at each interval end point. Through the concrete cases, after clashing the lead-time, the manufacturer´s cost will decrease, while the supplier´s cost will increase. What´s more, the range of the decreasing cost is greater than that of the increasing cost. Therefore, transferred payment is needed to properly compensate the supplier.