Value of capacity pooling in supply chains with heterogeneous customers

We investigate the value of pooling capacity in supply chains that serve product demands of different variabilities. We build and analyze models that integrate production queuing models with base stock inventory systems serving demands with different inter-arrival time distributions. The first model...

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Bibliographic Details
Published in:European journal of operational research 2007-02, Vol.177 (1), p.239-260
Main Author: Jain, Apurva
Format: Article
Language:English
Subjects:
Applied sciences
Exact sciences and technology
Inventory
Inventory control, production control. Distribution
Logistics
Operational research and scientific management
Operational research. Management science
Production–inventory systems
Queuing theory
Queuing theory. Traffic theory
Simulation
Studies
Supply chain management
Supply chains
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Summary:We investigate the value of pooling capacity in supply chains that serve product demands of different variabilities. We build and analyze models that integrate production queuing models with base stock inventory systems serving demands with different inter-arrival time distributions. The first model combines hyperexponential and exponential demand inter-arrival time distributions. Exact analysis of the model allows us to develop insights into the impact of the difference in demand variabilities on the value of pooling capacity. Simulation experiments allow us to validate these insights for more general settings. We then find one special case that combines exponential and deterministic demand arrivals with deterministic service, where pooling capacity results in increasing the total cost.
ISSN:0377-2217
1872-6860
DOI:10.1016/j.ejor.2005.12.006