Service Constrained (s, S) Inventory Systems with Priority Demand Classes and Lost Sales

Morris A. Cohen, Paul R. Kleindorfer and Hau L. Lee
Additional contact information
Morris A. Cohen: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Paul R. Kleindorfer: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Hau L. Lee: Department of Industrial Engineering and Engineering Management, Stanford University, Stanford, California 94305

Management Science, 1988, vol. 34, issue 4, 482-499

Abstract: This paper presents a model of an (s, S) inventory system in which there are two priority classes of customers. The model treats excess demands as lost sales and can accommodate an arbitrary deterministic lead time. After considering the associated Markov-chain model, an approximate, renewal-based model is derived. This approximation is used to develop a greedy heuristic which minimizes expected costs subject to a fill-rate service constraint. The paper concludes with the results of an extensive numerical test of both the accuracy of the approximation and the performance of the heuristic with respect to the true optimal solution. Results indicate good performance which deteriorates as the fill rate requirement and lead time increase.

Keywords: inventory/production; approximations; ordering; stochastic models (search for similar items in EconPapers)
Date: 1988
References: Add references at CitEc
Citations: View citations in EconPapers (49)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.34.4.482 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:34:y:1988:i:4:p:482-499

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().