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On the (S − 1, S) lost sales inventory model with priority demand classes

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  • R. Dekker
  • R.M. Hill
  • M.J. Kleijn
  • R.H. Teunter

Abstract

In this paper an inventory model with several demand classes, prioritised according to importance, is analysed. We consider a lot‐for‐lot or (S − 1, S) inventory model with lost sales. For each demand class there is a critical stock level at and below which demand from that class is not satisfied from stock on hand. In this way stock is retained to meet demand from higher priority demand classes. A set of such critical levels determines the stocking policy. For Poisson demand and a generally distributed lead time, we derive expressions for the service levels for each demand class and the average total cost per unit time. Efficient solution methods for obtaining optimal policies, with and without service level constraints, are presented. Numerical experiments in which the solution methods are tested demonstrate that significant cost reductions can be achieved by distinguishing between demand classes. © 2002 Wiley Periodicals, Inc. Naval Research Logistics 49: 593–610, 2002; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/nav.10032

Suggested Citation

  • 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.
    • Handle: RePEc:wly:navres:v:49:y:2002:i:6:p:593-610
    DOI: 10.1002/nav.10032
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    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. Melchiors, Philip, 2003. "Restricted time-remembering policies for the inventory rationing problem," International Journal of Production Economics, Elsevier, vol. 81(1), pages 461-468, January.
    3. Agassi Melikov & Ramil Mirzayev & Janos Sztrik, 2023. "Double-Sources Queuing-Inventory Systems with Finite Waiting Room and Destructible Stocks," Mathematics, MDPI, vol. 11(1), pages 1-16, January.
    4. Kleijn, M.J. & Dekker, R., 1998. "An overview of inventory systems with several demand classes," Econometric Institute Research Papers EI 9838, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    5. P Melchiors & R Dekker & M J Kleijn, 2000. "Inventory rationing in an (s, Q) inventory model with lost sales and two demand classes," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 51(1), pages 111-122, January.
    6. Axsater, Sven & Olsson, Fredrik & Tydesjo, Patrik, 2007. "Heuristics for handling direct upstream demand in two-echelon distribution inventory systems," International Journal of Production Economics, Elsevier, vol. 108(1-2), pages 266-270, July.
    7. 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.
    8. 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.
    9. 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.

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