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Technical Note—A Make-to-Stock System with Multiple Customer Classes and Batch Ordering

Department of Industrial and Systems Engineering, National University of Singapore, Singapore 117576
Department of Industrial Engineering and Management Sciences, Northwestern University, Evanston, Illinois 60208
isehb{at}nus.edu.sg
iravani{at}iems.northwestern.edu

This paper examines the impact of customer order sizes on a make-to-stock system with multiple demand classes. We first characterize the manufacturer's optimal production and rationing policies when the demand is nonunitary and lost if unsatisfied. We also investigate the optimal policies of a backorder system with two demand classes and fixed order sizes. Through a numerical study, we show the effects of batch orders on the manufacturer's inventory cost as well as on the benefit of optimal stock rationing. It is shown that batch ordering may reduce the manufacturer's overall cost if carefully introduced in a first-come-first-served (FCFS) system. With the same effective demand rates, the customers' order sizes also have a strong impact on the benefit of optimal stock rationing.

Subject classifications: batch ordering; make-to-stock; stock rationing.
History: Received October 2004; revision received June 2007; accepted July 2007.