Managing individual customer service constraints under stochastic demand

Managing individual customer service constraints under stochastic demand

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Article ID: iaor20043451
Country: Netherlands
Volume: 24
Issue: 3
Start Page Number: 115
End Page Number: 125
Publication Date: Apr 1999
Journal: Operations Research Letters
Authors: ,
Keywords: stochastic processes
Abstract:

In recent years management of customer requirements has been the foremost concern of most manufacturers. In this paper, we consider a single-period problem in which the manufacturer faces stochastic demand and individual service level constraints from multiple customers. We present a formulation for the problem that utilizes the structure of the underlying allocation problem and provide an algorithm that generates the optimal procurement quantity under the optimal random allocation policy. For a special case when there are two identical customers and their demand is jointly uniform, we derive an analytical expression for the optimal procurement quantity.

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