Comparison of two methods for customer differentiation

Adriana Gabor, Yang Guang and Sven Axsäter

ERIM Report Series Research in Management from 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

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.

Keywords: inventory planning; service differentiation; priority demand classes (search for similar items in EconPapers)
Date: 2014-02-15
New Economics Papers: this item is included in nep-mkt
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