Inventory reservation and real-time order promising in a Make-to-Stock system

Abstract

In this paper we consider a Make-to-Stock order fulfillment system facing random demand with random due date preferences from two classes of customers. We develop an integrated approach for reserving inventory in anticipation of future order arrivals from high priority customers and for order promising in real-time. Our research exhibits three distinct features: (1) we explicitly model uncertain due date preferences of the customers; (2) we consider multiple receipts in the planning horizon that can be utilized to fulfill customer orders; and (3) we choose to utilize a service level measure for reserving inventory rather than estimating short- and long-term implications of order promising with a penalty cost function. We propose an algorithm that exploits the time structure in order arrivals and time-phased material receipts to determine inventory reservations for high priority orders. Numerical experiments are conducted to investigate the performance and the benefits of the inventory reservation and order promising approach under varying system parameters.

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Correspondence to Richard Pibernik.

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Pibernik, R., Yadav, P. Inventory reservation and real-time order promising in a Make-to-Stock system. OR Spectrum 31, 281–307 (2009). https://doi.org/10.1007/s00291-007-0121-4

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Keywords

  • Make-to-Stock
  • Inventory reservation
  • Order fulfillment
  • Order promising
  • Inventory rationing