Dynamic Lead-Time Quotation for an M/M/1 Base-Stock Inventory Queue

Date

2010-03-01

Author

Savaşaneril Tüfekci, Seçil
Keskinocak, Pinar

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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We study a dynamic lead-time quotation problem in a base-stock inventory system characterized by lead-time sensitive Poisson demand and exponentially distributed service times. We show that the optimal profit is unimodal in the base-stock level. We compare the base-stock system with a make-to-order (MTO) system and show that the lead-time quotes are lower in an MTO system and that increasing the base-stock level does not necessarily decrease the expected number of customers waiting. Numerical results show that when customers are less sensitive to lead-time quotes, the benefit of quoting lead times with a higher precision is significant, whereas when customers are more sensitive to lead-time quotes, the benefit of holding inventory is significant.

Subject Keywords

Production systems, Customer classes, Single-machine, Order, Model, Flexibility, Guarantees, Decisions, Selection, Facility

URI

https://hdl.handle.net/11511/46161

Journal

OPERATIONS RESEARCH

DOI

https://doi.org/10.1287/opre.1090.0717

Collections

Department of Industrial Engineering, Article

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Citation Formats

S. Savaşaneril Tüfekci and P. Keskinocak, “Dynamic Lead-Time Quotation for an M/M/1 Base-Stock Inventory Queue,” OPERATIONS RESEARCH, pp. 383–395, 2010, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/46161.