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Mathematical Problems in Engineering
Volume 2017, Article ID 5805404, 10 pages
Research Article

Optimization and Customer Utilities under Dynamic Lead Time Quotation in an Type Base Stock System

Department of Architecture, Civil Engineering and Industrial Management Engineering, Nagoya Institute of Technology, Gokiso-cho, Showa-ku, Nagoya 466-8555, Japan

Correspondence should be addressed to Koichi Nakade;

Received 23 February 2017; Revised 10 April 2017; Accepted 2 May 2017; Published 25 May 2017

Academic Editor: Huanqing Wang

Copyright © 2017 Koichi Nakade and Hiroki Niwa. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


In a manufacturing and inventory system, information on production and order lead time helps consumers’ decision whether they receive finished products or not by considering their own impatience on waiting time. In Savaşaneril et al. (2010), the optimal dynamic lead time quotation policy in a one-stage production and inventory system with a base stock policy for maximizing the system’s profit and its properties are discussed. In this system, each arriving customer decides whether he/she enters the system based on the quoted lead time informed by the system. On the other hand, the customer’s utility may be small under the optimal quoted lead time policy because the actual lead time may be longer than the quoted lead time. We use a utility function with respect to benefit of receiving products and waiting time and propose several kinds of heuristic lead time quotation policies. These are compared with optimal policies with respect to both profits and customer’s utilities. Through numerical examples some kinds of heuristic policies have better expected utilities of customers than the optimal quoted lead time policy maximizing system’s profits.