A comprehensive process lot sizing/order point model is developed, in which queuing relationships are used to
endogenously model the effects of lot size on the lead time demand distribution. The model is used to examine the effect
of shortage penalty on the optimal lot size, when the model reflects job queuing dynamics arising from the lot size
decision. A coordinated policy of safety stock adjustment and lead time reduction through lot size adjustment is
shown be more efficient than responding to changes in the shortage penalty parameter solely through adjustment of
safety stock.