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Cost analysis of an (S−1,S) inventory system with two demand classes and rationing

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  • K. Sapna Isotupa

Abstract

In this paper we analyze a continuous review, lost sales (S−1,S) inventory system with two demand classes—high priority and low priority. We compare two different policies—one where the two classes of customers are treated exactly alike and the other where a threshold rationing policy is used. We prove that under certain conditions there is a sub-optimal rationing policy which yields a lower cost for the supplier and higher service levels for both the high priority and low priority customers than the optimal policy where the two customers are treated alike. Copyright Springer Science+Business Media New York 2015

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  • K. Sapna Isotupa, 2015. "Cost analysis of an (S−1,S) inventory system with two demand classes and rationing," Annals of Operations Research, Springer, vol. 233(1), pages 411-421, October.
    • Handle: RePEc:spr:annopr:v:233:y:2015:i:1:p:411-421:10.1007/s10479-013-1407-3
    DOI: 10.1007/s10479-013-1407-3
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    1. 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.
    2. 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.
    3. R. Dekker & R.M. Hill & M.J. Kleijn & R.H. Teunter, 2002. "On the (S − 1, S) lost sales inventory model with priority demand classes," Naval Research Logistics (NRL), John Wiley & Sons, vol. 49(6), pages 593-610, September.
    4. Steven Nahmias & W. Steven Demmy, 1981. "Operating Characteristics of an Inventory System with Rationing," Management Science, INFORMS, vol. 27(11), pages 1236-1245, November.
    5. 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.
    6. Albert Y. Ha, 1997. "Stock‐rationing policy for a make‐to‐stock production system with two priority classes and backordering," Naval Research Logistics (NRL), John Wiley & Sons, vol. 44(5), pages 457-472, August.
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    Cited by:

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    4. Palatnik, Ruslana Rachel & Freer, Mikhail & Levin, Mark & Golberg, Alexander & Zilberman, David, 2023. "Algae-Based Two-Stage Supply Chain with Co-Products," Ecological Economics, Elsevier, vol. 207(C).
    5. Fathi, Mahdi & Khakifirooz, Marzieh & Diabat, Ali & Chen, Huangen, 2021. "An integrated queuing-stochastic optimization hybrid Genetic Algorithm for a location-inventory supply chain network," International Journal of Production Economics, Elsevier, vol. 237(C).
    6. 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.
    7. 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.
    8. Umay Uzunoglu Kocer & Bahar Yalcin, 2020. "Continuous review (s, Q) inventory system with random lifetime and two demand classes," OPSEARCH, Springer;Operational Research Society of India, vol. 57(1), pages 104-118, March.

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