Differentiating customer service on the basis of delivery lead-times

This paper studies distribution systems that provide two classes of service: emergency service and non-emergency service. The two service classes are differentiated by a demand-lead-time, which is the time elapsed from a demand arrival to its fulfillment. An emergency service demand is to be filled immediately upon its arrival, while a non-emergency demand is not filled until >T days later. We first analyze a single location model with the two service classes. We then extend the analysis to a two-echelon system. We study steady-state characteristics of the systems to derive various performance metrics. We then discuss managerial issues related to system design and control.

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