Service Constrained (s,S) Inventory Systems with Priority Demand Classes and Lost Sales
Morris A. Cohen, Paul R. Kleindorfer, Hau L. Lee
Management Science · 1988 · Volume 34 · Issue 4
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
Enable JavaScript for citation tools and additional paper interactions.