STOCHASTICS SEMINAR :: Dynamic Due Date Quotation for Base-Stock Inventory Systems

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Faced by squeezed profit margins due to competition, firms are
looking for ways to differentiate themselves, such as by being
responsive in fulfilling demand while keeping the delivery promises.
We look at the dynamic due date quotation problem under base-stock
inventory holding, where the demand is lead-time sensitive and unmet
due dates are penalized. We examine several facets of the due date
quotation problem, including quoting reliable due-dates based on workload
status, maximizing profit considering the lateness cost incurred
due to late deliveries, and deciding on the level of inventory. We develop
a structural analysis of the optimal due-date quotation policy under
a given base-stock level and we show an optimal policy exists and
is monotone in the number of customers. We also obtain insights on
the optimal base-stock level. We conduct experiments to identify when is
it more profitable to operate in a pure make-to-order environment,
and when is it more profitable to keep inventory; how much inventory
should be kept; and how utilization levels affect the profits.


  • Workflow Status:
  • Created By:
    Barbara Christopher
  • Created:
  • Modified By:
    Fletcher Moore
  • Modified:


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