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Inventory Rationing in a Make-to-Stock Production System with Several Demand Classes and Lost Sales

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Author Info

  • Albert Y. Ha

    (School of Management, Yale University, New Haven, Connecticut 06520)

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    Abstract

    This paper considers the stock rationing problem of a single-item, make-to-stock production system with several demand classes and lost sales. For the case of Poisson demands and exponential production times, we show that the optimal policy can be characterized by a sequence of monotone stock rationing levels. For each demand class, there exists a stock rationing level at or below which it is optimal to start rejecting the demand of this class in anticipation of future arrival of higher priority demands. A simple queueing model is analyzed to compute the operating cost of a rationing policy. In a numerical study, we compare the optimal rationing policy with a first-come first-served policy to investigate the benefit of stock rationing under different operating conditions of the system.

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    File URL: http://dx.doi.org/10.1287/mnsc.43.8.1093
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 43 (1997)
    Issue (Month): 8 (August)
    Pages: 1093-1103

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    Handle: RePEc:inm:ormnsc:v:43:y:1997:i:8:p:1093-1103

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    Related research

    Keywords: inventory/production; inventory rationing; dynamic programming/optimal control; applications;

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