The effect of customer segmentation on an inventory system in the presence of supply disruptions

Authors:
Yuerong Chen;Xueping Li
Affiliations:
The University of Tennessee at Knoxville, East Stadium Hall, Knoxville, TN;The University of Tennessee at Knoxville, East Stadium Hall, Knoxville, TN
Venue:
Winter Simulation Conference
Year:
2009

Citing 3
Cited 3

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Abstract

Customer segmentation is an important marketing tool. Effective customer segmentation helps the enterprises increase profits and improve customer service level. On the other hand, due to possible detrimental consequences, supply disruptions have been receiving more and more attention. This paper aims to investigate the effect of customer segmentation on a single-product inventory system in the presence of supply disruptions. The concerned inventory system involves an unreliable supplier, a retailer, and customers. The retailer adopts a continuous-review (s, S) inventory policy. Partial backordering is considered when stockouts occur. This inventory system is simulated. Based on different customer backorder proportions, the effect of customer segmentation on the inventory system is studied under different scenarios about supply disruption severity. The experimental results show that supply disruption duration is an important factor in influencing the effect of customer segmentation on the inventory system. Some managerial insights are also derived from the results.