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Service differentiation in a single-period inventory model with numerous customer classes

Author

Listed:
  • Benedikt Schulte

    (Wuerzburg University)

  • Richard Pibernik

    (Wuerzburg University
    MIT-Zaragoza International Logistics Program, Zaragoza Logistics Center)

Abstract

We study critical-level inventory-management policies as means to provide differentiated ( $$\alpha $$ α and $$\beta $$ β ) service levels to more than two classes of customers. First, we derive closed-form expressions for the service levels of a single-period critical-level policy with an arbitrary number of customer classes (with Poisson demand). Based on the service-level expressions, we derive additional structural insights and provide an efficient algorithm with which to compute the essential system parameters, that is, the minimum required starting inventory and the associated critical levels. Based on these results, we conduct numerical experiments and develop structural insights into the system’s behavior.

Suggested Citation

  • Benedikt Schulte & Richard Pibernik, 2016. "Service differentiation in a single-period inventory model with numerous customer classes," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(4), pages 921-948, October.
    • Handle: RePEc:spr:orspec:v:38:y:2016:i:4:d:10.1007_s00291-016-0432-4
    DOI: 10.1007/s00291-016-0432-4
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    References listed on IDEAS

    as
    1. Sugoutam Ghosh & Rajesh Piplani & S. Viswanathan, 2015. "A New Two-Bin Policy for Inventory Systems with Differentiated Demand Classes," Production and Operations Management, Production and Operations Management Society, vol. 24(5), pages 840-850, May.
    2. Pourakbar, Morteza & Dekker, Rommert, 2012. "Customer differentiated end-of-life inventory problem," European Journal of Operational Research, Elsevier, vol. 222(1), pages 44-53.
    3. Teunter, Ruud H. & Klein Haneveld, Willem K., 2008. "Dynamic inventory rationing strategies for inventory systems with two demand classes, Poisson demand and backordering," European Journal of Operational Research, Elsevier, vol. 190(1), pages 156-178, October.
    4. Hasan Arslan & Stephen C. Graves & Thomas A. Roemer, 2007. "A Single-Product Inventory Model for Multiple Demand Classes," Management Science, INFORMS, vol. 53(9), pages 1486-1500, September.
    5. Samii, Amir-Behzad & Pibernik, Richard & Yadav, Prashant & Vereecke, Ann, 2012. "Reservation and allocation policies for influenza vaccines," European Journal of Operational Research, Elsevier, vol. 222(3), pages 495-507.
    6. Vinayak Deshpande & Morris A. Cohen & Karen Donohue, 2003. "A Threshold Inventory Rationing Policy for Service-Differentiated Demand Classes," Management Science, INFORMS, vol. 49(6), pages 683-703, June.
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    Cited by:

    1. Fadaki, Masih & Abareshi, Ahmad & Far, Shaghayegh Maleki & Lee, Paul Tae-Woo, 2022. "Multi-period vaccine allocation model in a pandemic: A case study of COVID-19 in Australia," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 161(C).

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