Article ID: | iaor2002170 |
Country: | United States |
Volume: | 3 |
Issue: | 1 |
Start Page Number: | 43 |
End Page Number: | 50 |
Publication Date: | Jan 2001 |
Journal: | Manufacturing & Service Operations Management |
Authors: | Gallego Guillermo, Boyaci Tamer |
Keywords: | inventory |
We analyze the problem of minimizing average inventory costs subject to fill-rate type of service-level constraints in serial and assembly production/distribution systems. We propose optimal and heuristic procedures to solve this problem. Our model and solution procedures can be used to manage the fill rate or fill rate within a ‘time window’ service measures. We also relate our service-constrained model to the traditional model with back-order costs and show that it is possible to prespecify backorder cost rates to achieve desired service levels. We explore the inventory cost impact of such a practice, and we find that the cost penalty can be very high.