Determining Items to be Inventoried in a Manufacturing Process

In most manufacturing systems, all customers are expected to take deliveries from inventory. However, in some situations, management may keep inventory only for some customers and not keep inventory for the others. The reason is that they would like to make as much benefit as possible from the first group of customers and this may help sell these customers on further products. This paper attempts to determine the cutoff between the group of customers who are given products immediately when their orders come and other customers who will be served but have to wait for the production of their products. The optimum set of customers to be served immediately and the optimum set of customers who have to wait for the production are found using linear programming to optimize perceived manufacturer benefits measured as the product of the benefit factor and the corresponding profit per customer. The results indicate that it is not necessarily wise to keep inventory for all customers.