Inventory Commitment and Prioritized Backlogging Clearance with Alternative Delivery Lead Times

Abstract

W e propose a model where customers are classified into two groups: short lead-time customers who require the product immediately and long lead-time customers to whom the supplier may deliver either immediately or in the next cycle. Unmet orders are backlogged with associated costs. Specifically, the supplier faces two problems: how the onhand inventories should be allocated between the two classes of customers and how the backlogged orders should be cleared when replenishments arrive. We treat the former as an inventory commitment problem and handle the latter with priority rules. We characterize and compare the inventory commitment policies with three priority rules in clearing backlogs. We also explore the optimal inventory replenishment decision and evaluate the performance of each priority rule.

Heuristic-based allocation of supply constrained blood platelets in emerging economies

“…Optimal inventory allocation is less explored than traditional cost minimization inventory management problems especially when the inventory is perishable. Examples include Arslan et al (2007), who discussed a continuous review heuristic for minimizing expected on-hand inventory by rationing a single product inventory between two demand differentiated classes based on their service level requirements in an infinite horizon; Wang et al (2014), who considered two demand classes based on lead time (short and long); Frank et al (2003), who analyzes a rationing policy based on periodic review policy among a stochastic demand class of lower priority and a deterministic demand class of higher priority; and Ding et al (2016), who considering multiple Poisson distributed demand classes propose an inventory allocation policy considering partial class-dependent back-orders. The assumption that unfulfilled demand may be back ordered is common to all the cited papers.…”

Inventory Rationing for Multiple Class Demand under Continuous Review

“…Recently, Wang et al. () consider a model where a supplier dynamically allocates on‐hand inventory to two classes of customers between inventory replenishments and needs to also determine how to server backordered customers at the time of a replenishment. Liu et al.…”

Inventory control and replenishment with flexible delivery‐time upgrade

“…Our work adds to this line of research by considering how to use a flexible lead‐time management policy, that is, an upgrade mechanism, in the presence of time‐differentiated demand, which is “helpful in showing how to manage systems with segmented demand” . The closest work to this article is that of . Reference characterize the optimal inventory commitment and replenishment policies, when the seller imposes control over incoming long orders on the spot.…”

“…Reference characterize the optimal inventory commitment and replenishment policies, when the seller imposes control over incoming long orders on the spot. further consider the role of priority rules in clearing backlogs. We generalize the unitary inventory control in by introducing the upgrade decision, which applies to all outstanding unfulfilled orders.…”

“…Otherwise, there may be an incentive for the seller to strategically reserve inventory for future demands instead of satisfying the outstanding long orders. This possibility is considered in Wang et al .…”