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Comparison of two methods for customer differentiation

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  • Gabor, A.F.
  • Guang, Y.
  • Axsäter, S.

Abstract

In response to customer specific time guarantee requirements, service providers can offer differentiated ser- vices. However, conventional customer differentiation methods often lead to high holding costs and may have some practical drawbacks. We compare two customer differentiation policies: stock reservation and pipeline stock priority for high priority customers. We derive exact analytical expressions of the waiting time distri- bution of both types of customers for a stock reservation policy. We then provide accurate approximation methods for a pipeline stock priority policy. By comparison, we offer insights concerning which method should be used under different service level requirements.

Suggested Citation

  • 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.
    • Handle: RePEc:ems:eureri:50502
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    References listed on IDEAS

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    Keywords

    inventory planning; service differentiation; priority demand classes;
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