Investigation into inventory fulfillment of different priority order classes

• Main Author: Tan, Wei Song.
• Other Authors: Rajesh Piplani
• Format: Final Year Project
• Language: English
• Published: 2011
• Subjects: DRNTU::Engineering::Systems engineering
• Online Access: http://hdl.handle.net/10356/46028
• Institution: Nanyang Technological University

The quest to provide a differentiated service for customers with minimal cost has been in the limelight for researchers of management science. Customers are differentiating themselves by the level of service demanded for the same product and as such, meant that different penalty cost is incurred to the company should they fail to meet them. Traditional models address only for single demand class and thus various new models are developed for that purpose. One such inventory policy that has stepped forward is the Inventory Rationing Policy. By reserving inventory for demand from higher priority classes, a high service level for them is produced. To do so, meant sacrificing the service level for lower priority classes. This was a fair trade off as satisfying higher priority classes provide a higher cost savings than satisfying lower priority classes due to the difference in penalty cost. In this report, a proposed Three Bin Policy is evaluated against the Inventory Rationing Policy. The proposed policy was designed to address the flaw of a low service level for lower priority classes faced in the Inventory Rationing Policy. The policies will both be set in a continuous review environment with three customer classes with demand following Poisson distribution. Demands that are unmet will be backordered and is cleared upon the arrival of replenishment. By setting the parameters for both models to be equal, experiments are carried out using models developed from using ARENA simulation software to study their performance in terms of total cost and service levels.