IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v269y2018i3p900-908.html
   My bibliography  Save this article

A base-stock inventory model with service differentiation and response time guarantees

Author

Listed:
  • Gabor, Adriana F.
  • van Vianen, Lars A.
  • Yang, Guangyuan
  • Axsäter, Sven

Abstract

In response to customer specific service time guarantee requirements, service providers can offer differentiated services. Although response time agreements offer more flexibility, most of the theoretical models for customer differentiation are based on fill rates, due to the difficulty of calculating the response time distribution in the presence of priorities. In this paper we focus on the (S−1,S,K) model with two customer classes, in which low priority customers are served only if the inventory level is above K. For this model, we derive the exact distribution of the response time (within lead time) for the lower priority class and provide a new closed-form approximation for the fill rate for high priority customers. Via numerical experiments, we show that the fill rate approximation performs comparable to the best approximations in the literature, while its implementation requires only elementary operations.

Suggested Citation

  • Gabor, Adriana F. & van Vianen, Lars A. & Yang, Guangyuan & Axsäter, Sven, 2018. "A base-stock inventory model with service differentiation and response time guarantees," European Journal of Operational Research, Elsevier, vol. 269(3), pages 900-908.
    • Handle: RePEc:eee:ejores:v:269:y:2018:i:3:p:900-908
    DOI: 10.1016/j.ejor.2018.02.039
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221718301723
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2018.02.039?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Oguzhan Vicil & Peter Jackson, 2016. "Computationally efficient optimization of stock pooling and allocation levels for two-demand-classes under general lead time distributions," IISE Transactions, Taylor & Francis Journals, vol. 48(10), pages 955-974, October.
    2. Lengu, D. & Syntetos, A.A. & Babai, M.Z., 2014. "Spare parts management: Linking distributional assumptions to demand classification," European Journal of Operational Research, Elsevier, vol. 235(3), pages 624-635.
    3. 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.
    4. Donald M. Topkis, 1968. "Optimal Ordering and Rationing Policies in a Nonstationary Dynamic Inventory Model with n Demand Classes," Management Science, INFORMS, vol. 15(3), pages 160-176, November.
    5. Lars A. Vianen & Adriana F. Gabor & Jan-Kees Ommeren, 2016. "Waiting times in classical priority queues via elementary lattice path counting," Queueing Systems: Theory and Applications, Springer, vol. 84(3), pages 295-307, December.
    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.
    7. Dekker, R. & Kleijn, M. J. & de Rooij, P. J., 1998. "A spare parts stocking policy based on equipment criticality," International Journal of Production Economics, Elsevier, vol. 56(1), pages 69-77, September.
    8. Steven Nahmias & W. Steven Demmy, 1981. "Operating Characteristics of an Inventory System with Rationing," Management Science, INFORMS, vol. 27(11), pages 1236-1245, November.
    9. Jianfu Wang & Opher Baron & Alan Scheller-Wolf, 2015. "M/M/c Queue with Two Priority Classes," Operations Research, INFORMS, vol. 63(3), pages 733-749, June.
    10. Arthur F. Veinott, 1965. "Optimal Policy in a Dynamic, Single Product, Nonstationary Inventory Model with Several Demand Classes," Operations Research, INFORMS, vol. 13(5), pages 761-778, October.
    11. Albert Y. Ha, 1997. "Inventory Rationing in a Make-to-Stock Production System with Several Demand Classes and Lost Sales," Management Science, INFORMS, vol. 43(8), pages 1093-1103, August.
    12. van Vianen, L.A. & Gabor, A.F. & van Ommeren, J.C.W., 2016. "Waiting times in classical priority queues via elementary lattice path counting," Econometric Institute Research Papers EI2016-17, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    13. Patrik Alfredsson & Jos Verrijdt, 1999. "Modeling Emergency Supply Flexibility in a Two-Echelon Inventory System," Management Science, INFORMS, vol. 45(10), pages 1416-1431, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Oguzhan Vicil, 2021. "Optimizing stock levels for service-differentiated demand classes with inventory rationing and demand lead times," Flexible Services and Manufacturing Journal, Springer, vol. 33(2), pages 381-424, June.
    2. Mohammad Najjartabar Bisheh & G. Reza Nasiri & Esmaeil Esmaeili & Hamid Davoudpour & Shing I. Chang, 2022. "A new supply chain distribution network design for two classes of customers using transfer recurrent neural network," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 13(5), pages 2604-2618, October.
    3. Gabor, Adriana F. & van Ommeren, Jan-Kees & Sleptchenko, Andrei, 2022. "An inventory model with discounts for omnichannel retailers of slow moving items," European Journal of Operational Research, Elsevier, vol. 300(1), pages 58-72.
    4. Oguzhan VICIL, 2022. "Cost optimization in the $$(S-1, S)$$ ( S - 1 , S ) backorder inventory model with two demand classes and rationing," Flexible Services and Manufacturing Journal, Springer, vol. 34(1), pages 101-124, March.
    5. Mária Stopková & Ondrej Stopka & Vladimír Ľupták, 2019. "Inventory Model Design by Implementing New Parameters into the Deterministic Model Objective Function to Streamline Effectiveness Indicators of the Inventory Management," Sustainability, MDPI, vol. 11(15), pages 1-15, August.
    6. Basten, Rob J.I. & Ryan, Jennifer K., 2019. "The value of maintenance delay flexibility for improved spare parts inventory management," European Journal of Operational Research, Elsevier, vol. 278(2), pages 646-657.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gabor, A.F. & van Vianen, L.A. & Yang, G. & Axsäter, S., 2016. "Enabling customer satisfaction and stock reduction through service differentiation with response time guarantees," Econometric Institute Research Papers EI2016-13, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    2. ElHafsi, Mohsen & Fang, Jianxin & Hamouda, Essia, 2021. "Optimal production and inventory control of multi-class mixed backorder and lost sales demand class models," European Journal of Operational Research, Elsevier, vol. 291(1), pages 147-161.
    3. Alfieri, Arianna & Pastore, Erica & Zotteri, Giulio, 2017. "Dynamic inventory rationing: How to allocate stock according to managerial priorities. An empirical study," International Journal of Production Economics, Elsevier, vol. 189(C), pages 14-29.
    4. Mohammad Najjartabar Bisheh & G. Reza Nasiri & Esmaeil Esmaeili & Hamid Davoudpour & Shing I. Chang, 2022. "A new supply chain distribution network design for two classes of customers using transfer recurrent neural network," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 13(5), pages 2604-2618, October.
    5. Karin T. Möllering & Ulrich W. Thonemann, 2008. "An optimal critical level policy for inventory systems with two demand classes," Naval Research Logistics (NRL), John Wiley & Sons, vol. 55(7), pages 632-642, October.
    6. Quan-Lin Li & Yi-Meng Li & Jing-Yu Ma & Heng-Li Liu, 2023. "A complete algebraic solution to the optimal dynamic rationing policy in the stock-rationing queue with two demand classes," Journal of Combinatorial Optimization, Springer, vol. 45(3), pages 1-54, April.
    7. Mahdavi, Mojtaba & Olsen, Tava Lennon, 2021. "The dual-serving problem: What is the right choice of inventory strategy?," Omega, Elsevier, vol. 103(C).
    8. Samii, Amir-Behzad & Pibernik, Richard & Yadav, Prashant, 2011. "An inventory reservation problem with nesting and fill rate-based performance measures," International Journal of Production Economics, Elsevier, vol. 133(1), pages 393-402, September.
    9. 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.
    10. FadIloglu, Mehmet Murat & Bulut, Önder, 2010. "A dynamic rationing policy for continuous-review inventory systems," European Journal of Operational Research, Elsevier, vol. 202(3), pages 675-685, May.
    11. Gabor, A.F. & Guang, Y. & Axsäter, S., 2014. "Comparison of two methods for customer differentiation," ERIM Report Series Research in Management ERS-2014-003-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    12. Bing Lin & Shaoxiang Chen & Yi Feng & Jianjun Xu, 2018. "The Joint Stock and Capacity Rationings of a Make-To-Stock System with Flexible Demand," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(01), pages 1-27, February.
    13. Liu, Shudong & Song, Miao & Tan, Kok Choon & Zhang, Changyong, 2015. "Multi-class dynamic inventory rationing with stochastic demands and backordering," European Journal of Operational Research, Elsevier, vol. 244(1), pages 153-163.
    14. 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.
    15. Tempelmeier, Horst, 2006. "Supply chain inventory optimization with two customer classes in discrete time," European Journal of Operational Research, Elsevier, vol. 174(1), pages 600-621, October.
    16. P. Escalona & F. Ordóñez & I. Kauak, 2017. "Critical level rationing in inventory systems with continuously distributed demand," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 39(1), pages 273-301, January.
    17. Gabor, Adriana F. & van Ommeren, Jan-Kees & Sleptchenko, Andrei, 2022. "An inventory model with discounts for omnichannel retailers of slow moving items," European Journal of Operational Research, Elsevier, vol. 300(1), pages 58-72.
    18. Oguzhan Vicil, 2021. "Optimizing stock levels for service-differentiated demand classes with inventory rationing and demand lead times," Flexible Services and Manufacturing Journal, Springer, vol. 33(2), pages 381-424, June.
    19. Weihua Zhou & Chung‐Yee Lee & David Wu, 2011. "Optimal control of a capacitated inventory system with multiple demand classes," Naval Research Logistics (NRL), John Wiley & Sons, vol. 58(1), pages 43-58, February.
    20. 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.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:269:y:2018:i:3:p:900-908. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.