Inventory rationing policy and backup supply with two classes of customers

Mingwu Liu and Xiaomei Wei

PLOS ONE, 2019, vol. 14, issue 4, 1-16

Abstract: In this paper, we consider joint decisions on inventory rationing and replenishment from a regular supplier or a backup supplier with two classes of customers. When the on-hand inventory falls below a certain critical level, an inventory rationing policy is implemented to reject lower priority customers. We investigated the potential use of a backup supplier as a response to inventory rationing policy. First, we establish an inventory level transition equilibrium equation for the steady-state inventory level probability distributions and derive analytical steady-state performance indicators. Next, the inventory cost function and the nonlinear optimization model are characterized. We use real-coded genetic algorithm (RCGA) to search for the optimal joint decisions. Finally, the proposed algorithm and the joint decisions are investigated with different inventory service polices through numerical experiments. The results show that the inventory rationing policy (IRP) is superior to the traditional priority service policy (CPSP) and the common first-come-first service policy (FCFSP). The backup supply can reduce inventory costs with high arrival intensity.

Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0214386 (text/html)
https://journals.plos.org/plosone/article/file?id= ... 14386&type=printable (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:plo:pone00:0214386

DOI: 10.1371/journal.pone.0214386

Access Statistics for this article

More articles in PLOS ONE from Public Library of Science
Bibliographic data for series maintained by plosone (plosone@plos.org).