Rationing policies for some inventory systems
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Rationing policies for some inventory systems I Moon1 and S Kang2 1
Pusan National University and 2Seoul National University, Korea
This paper considers inventory systems which maintain stocks to meet various demand classes with different priorities. We use the concept of a support level control policy. That is rationing is accomplished by maintaining a support level, say K, such that when on hand stock reaches K, all low priority demands are backordered. We develop four analytical and simulation models to improve the existing models. Firstly, multiple support levels are used instead of using a single support level. Secondly, a simulation model with a more realistic assumption on the demand process has been provided. Thirdly, a single period deterministic cost minimisation model has been developed analytically. Finally, we address a continuous review (Q, r) model with a compound Poisson process. Keywords: inventory; rationing policy; simulation
Introduction Distinguishing between various priority classes of demand arises frequently in practice. For example in a hospital emergency room blood is rationed in accordance to the emergency levels of patients. A second example is a computer monitoring system where computer codes and blocks are allocated in accordance with the priority levels such as professors, graduate students and undergraduate students, etc. A third example is a military system where an item is used in several different weapons or by units with different missions. A fourth example is a general sales company where different customers for the same product yield different pro®ts per unit sold. In addition to these systems, we ®nd examples of rationing in airline reservations, pre-sales of season tickets, etc. Several researchers have dealt with inventory systems in which there are several priority customers. Kaplan1 addresses the use of reserve levels, that is stock levels at which to stop issuing in response to lower priority customer. Veinott2 develops a multiperiod single product nonstationary inventory model where the system is reviewed at the beginning of each of a sequence of periods of equal length. Evans3 and Topkis4 independently develop conditions where optimal rationing policy between successive procurements of new stock is determined by a set of critical rationing levels such that at a given time one satis®es demand of a given class only if no demand of a more important class remains unsatis®ed and as long as the stock level does not fall below the critical rationing level for that class at that time. Nahmias and Demmy5 develop methods to compute the expected number of backorders for high and low priority customers for several inventory models. They develop Correspondence: Dr I Moon, Department of Industrial Engineering, Pusan National University, Pusan 609-735, Korea. E-mail: [email protected]
methods to show how the support level, that is, the inventory level that s
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