Inventory Commitment and Prioritized Backlogging Clearance with Alternative Delivery Lead Times

Production and Operations Management, 23(7), 2014, 1227–1242

46 Pages Posted: 20 Apr 2020

See all articles by Haifeng Wang

Haifeng Wang

affiliation not provided to SSRN

Xiaoying Liang

City University of Hong Kong - Department of Management Sciences

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management

Houmin Yan

City University of Hong Kong (CityU) - Faculty of Business

Date Written: August 3, 2013

Abstract

We propose a model where customers are classified into two groups: short lead-time customers who require the product immediately and long lead-time customers to whom the supplier may deliver either immediately or in the next cycle. Unmet orders are backlogged with associated costs. Specifically, the supplier faces two problems: how the onhand inventories should be allocated between the two classes of customers and how the backlogged orders should be cleared when replenishments arrive. We treat the former as an inventory commitment problem and handle the latter with priority rules. We characterize and compare the inventory commitment policies with three priority rules in clearing backlogs. We also explore the optimal inventory replenishment decision and evaluate the performance of each priority rule.

Keywords: flexible delivery; backlog models; priority rules; inventory management

JEL Classification: C61, M11, M20, C40, C10, D83

Suggested Citation

Wang, Haifeng and Liang, Xiaoying and Sethi, Suresh and Yan, Houmin, Inventory Commitment and Prioritized Backlogging Clearance with Alternative Delivery Lead Times (August 3, 2013). Production and Operations Management, 23(7), 2014, 1227–1242, Available at SSRN: https://ssrn.com/abstract=3566081

Haifeng Wang

affiliation not provided to SSRN

Xiaoying Liang

City University of Hong Kong - Department of Management Sciences ( email )

Kowloon Tong, Kowloon
Hong Kong
34428647 (Phone)

Suresh Sethi (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road, SM30
Richardson, TX 75080-3021
United States

Houmin Yan

City University of Hong Kong (CityU) - Faculty of Business ( email )

Tat Chee Avenue, Kowloon, Hong Kong SAR
Kowloon
Hong Kong

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