On the (S-1, S) Lost Sales Inventory Model with Priority Demand Classes

Rommert Dekker, R.M. Hill and M.J. Kleijn
Additional contact information
R.M. Hill: University of Exeter
M.J. Kleijn: Erasmus University Rotterdam

No 97-114/4, Tinbergen Institute Discussion Papers from Tinbergen Institute

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 withoutservice 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.

Keywords: Inventory; demand classes; spare parts; lost sales; rationing (search for similar items in EconPapers)
Date: 1997-11-08
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: On the (S − 1, S) lost sales inventory model with priority demand classes (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:19970114

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