Optimal production and rationing policies of a make-to-stock production system with batch demand and backordering

Authors:
Jianjun Xu;Shaoxiang Chen;Bing Lin;Rohit Bhatnagar
Affiliations:
Division of Information Technology and Operations Management, Nanyang Business School, Nanyang Technological University, Nanyang Avenue, Singapore 639798, Singapore;Division of Information Technology and Operations Management, Nanyang Business School, Nanyang Technological University, Nanyang Avenue, Singapore 639798, Singapore;Singapore-MIT Alliance Program, Nanyang Technological University, Nanyang Avenue, Singapore 639798, Singapore;Division of Information Technology and Operations Management, Nanyang Business School, Nanyang Technological University, Nanyang Avenue, Singapore 639798, Singapore and Singapore-MIT Alliance Prog ...
Venue:
Operations Research Letters
Year:
2010

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Abstract

In this paper, we consider the stock rationing problem of a single-item make-to-stock production/inventory system with multiple demand classes. Demand arrives as a Poisson process with a randomly distributed batch size. It is assumed that the batch demand can be partially satisfied. The facility can produce a batch up to a certain capacity at the same time. Production time follows an exponential distribution. We show that the optimal policy is characterized by multiple rationing levels.