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Policies utilizing tactical inventory for service-differentiated customers

2008-03-01
Duran, Serhan
Liu, Tieming
Simchi-Levi, David
Swann, Julie L.
We consider a manufacturer serving two customer classes where one wants the item immediately and the second receives a discount to accept a delay. We show that an (S, R, B) base-stock policy is optimal under differentiation and non-differentiation where S, R, and B are the order-up-to, reserve-up-to, and backlog-up-to amounts.