Comparison of Two Methods for Customer Differentiation

31 Pages Posted: 19 Feb 2014

See all articles by Adriana F. Gabor

Adriana F. Gabor

Erasmus University Rotterdam (EUR)

Guangyuan Yang

Tinbergen Institute; Erasmus University Rotterdam (EUR); Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Sven Axsater

Lund University

Date Written: February 15, 2014

Abstract

In response to customer specific time guarantee requirements, service providers can offer differentiated services. 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 distribution 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

Suggested Citation

Gabor, Adriana F. and Yang, Guangyuan and Axsater, Sven, Comparison of Two Methods for Customer Differentiation (February 15, 2014). ERIM Report Series Reference No. ERS-2014-003-LIS, Available at SSRN: https://ssrn.com/abstract=2398435 or http://dx.doi.org/10.2139/ssrn.2398435

Adriana F. Gabor (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Guangyuan Yang

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Sven Axsater

Lund University ( email )

Box 117
Lund, SC Skane S221 00
Sweden

HOME PAGE: http://www.pm.lth.se/personal/sven_axsaeter/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
58
Abstract Views
1,166
Rank
679,519
PlumX Metrics