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Technical Note---A Make-to-Stock System with Multiple Customer Classes and Batch Ordering

Author

Listed:
  • Boray Huang

    (Department of Industrial and Systems Engineering, National University of Singapore, Singapore 117576)

  • Seyed M. R. Iravani

    (Department of Industrial Engineering and Management Sciences, Northwestern University, Evanston, Illinois 60208)

Abstract

This paper examines the impact of customer order sizes on a make-to-stock system with multiple demand classes. We first characterize the manufacturer's optimal production and rationing policies when the demand is nonunitary and lost if unsatisfied. We also investigate the optimal policies of a backorder system with two demand classes and fixed order sizes. Through a numerical study, we show the effects of batch orders on the manufacturer's inventory cost as well as on the benefit of optimal stock rationing. It is shown that batch ordering may reduce the manufacturer's overall cost if carefully introduced in a first-come-first-served (FCFS) system. With the same effective demand rates, the customers' order sizes also have a strong impact on the benefit of optimal stock rationing.

Suggested Citation

  • Boray Huang & Seyed M. R. Iravani, 2008. "Technical Note---A Make-to-Stock System with Multiple Customer Classes and Batch Ordering," Operations Research, INFORMS, vol. 56(5), pages 1312-1320, October.
    • Handle: RePEc:inm:oropre:v:56:y:2008:i:5:p:1312-1320
    DOI: 10.1287/opre.1080.0549
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    References listed on IDEAS

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    Cited by:

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    2. Huang, Boray & Wu, Andy, 2017. "Reduce shortage with self-reservation policy for a manufacturer paying both fixed and variable stockout expenditure," European Journal of Operational Research, Elsevier, vol. 262(3), pages 944-953.
    3. Xu, Jianjun & Serrano, Alejandro & Lin, Bing, 2017. "Optimal production and rationing policy of two-stage tandem production system," International Journal of Production Economics, Elsevier, vol. 185(C), pages 100-112.
    4. Zeynep Turgay & Fikri Karaesmen & E. Örmeci, 2015. "A dynamic inventory rationing problem with uncertain demand and production rates," Annals of Operations Research, Springer, vol. 231(1), pages 207-228, August.
    5. Chao, Gary H., 2013. "Production and availability policies through the Markov Decision Process and myopic methods for contractual and selective orders," European Journal of Operational Research, Elsevier, vol. 225(3), pages 383-392.
    6. 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.

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