A Single-Product Inventory Model for Multiple Demand Classes

Posted: 18 May 2005

See all articles by Hasan Arslan

Hasan Arslan

Sawyer School of Management

Stephen C. Graves

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Thomas Roemer

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: May 2005

Abstract

We consider a single-product inventory system that serves multiple demand classes, which differ in their shortage costs or service level requirements. We assume a critical-level control policy, and show the equivalence between this inventory system and a serial inventory system. Based on this equivalence, we develop a model for cost evaluation and optimization, under the assumptions of Poisson demand, deterministic replenishment lead-time, and a continuous-review (Q, R) policy with rationing. We propose a computationally-efficient heuristic and develop a bound on its performance. We provide a numerical experiment to show the effectiveness of the heuristic and the value from a rationing policy. Finally, we describe how to extend the model to permit service times, and to embed within a multi-echelon setting.

Keywords: Single-Product Inventory Model

Suggested Citation

Arslan, Hasan and Graves, Stephen C. and Roemer, Thomas, A Single-Product Inventory Model for Multiple Demand Classes (May 2005). Available at SSRN: https://ssrn.com/abstract=725803 or http://dx.doi.org/10.2139/ssrn.725803

Hasan Arslan

Sawyer School of Management ( email )

Boston, MA 02108
United States

Stephen C. Graves

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E62-579
77 Massachusetts Avenue
Cambridge, MA MA 02139
United States
617-253-6602 (Phone)
617-253-1462 (Fax)

HOME PAGE: http://web.mit.edu/sgraves/www/

Thomas Roemer (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
4,426
PlumX Metrics