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

Rommert Dekker · Richard Hill · Marcel J. Kleijn · Ruud H. Teunter

99 citations0/0 files storedNaval Research Logistics (NRL)

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Supply Chain and Inventory Management Reliability and Maintenance Optimization Advanced Queuing Theory Analysis

Abstract

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

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References

1999Revenue Management: Research Overview and Prospects 1997Inventory Rationing in a Make-to-Stock Production System with Several Demand Classes and Lost Sales 1968Optimal Ordering and Rationing Policies in a Nonstationary Dynamic Inventory Model with n Demand Classes 1965Optimal Policy in a Dynamic, Single Product, Nonstationary Inventory Model with Several Demand Classes 1997Stock-rationing policy for a make-to-stock production system with two priority classes and backordering 1981Operating Characteristics of an Inventory System with Rationing 1998A spare parts stocking policy based on equipment criticality 1988Service Constrained (s, S) Inventory Systems with Priority Demand Classes and Lost Sales

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