Revenue Management Models in the Manufacturing Industry

Download or read book Revenue Management Models in the Manufacturing Industry written by Tieming Liu (Ph. D.) and published by . This book was released on 2005 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt: (Cont.) For this problem we analyze the structure of the optimal policy and show that it is characterized by three state-independent control parameters: the produce-up-to level (S), the reserve-up-to level (R), and the backlog-up-to level (B). At the beginning of each period, the manufacturer will produce to bring the inventory level up to S or to the maximum capacity; during the period, s/he will set aside R units of inventory for the next period, and satisfy some customers with the remaining inventory, if expected future profit is higher; otherwise, s/he will satisfy customers with the inventory and backlog up to B units of demands. Then, we analyze a single-product, two-class-customer model in which demanding (high priority) customers would like to receive products immediately, while other customers are willing to wait in order to pay lower prices. For this model, we provide a heuristic policy characterized by three threshold levels: S, R, B.