Title: Optimal inventory rationing policy under service differentiation for multiple customer classes with deterministic demand

Authors: Sugoutam Ghosh; Rajesh Piplani; S. Viswanathan

Addresses: The Logistics Institute Asia Pacific, 21, Heng Mui Keng Terrace, #04-01, 119613, Singapore ' School of Mechanical and Aerospace Engineering, Nanyang Technological University, 50, Nanyang Avenue, 639798, Singapore ' Nanyang Business School, Nanyang Technological University, 50, Nanyang Avenue, 639798, Singapore

Abstract: In this paper, we consider inventory rationing policies for a single product with multiple customer classes. Demand for the product from each customer class occurs at a constant deterministic rate. The customers are segmented into different classes based on the penalty cost of backordering the demand. It is assumed that the demand is backordered for a customer class after its run-out time and satisfied only when the next replenishment arrives. The problem of determining the inventory rationing policy involves finding the cycle time for replenishment of the product and the run-out time for each customer class. An algorithm is developed to determine the optimal inventory rationing policy.

Keywords: optimisation; inventory rationing; inventory policy; multiple customer classes; deterministic demand; service differentiation; product replenishment; run-out time.

DOI: 10.1504/IJSOM.2014.060450

International Journal of Services and Operations Management, 2014 Vol.18 No.1, pp.38 - 56

Published online: 17 Jun 2014 *

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