Comparison of Two Methods for Customer Differentiation

In response to customer specific time guarantee requirements, service providers can offer differentiated services. However, conventional customer differentiation methods often lead to high holding costs and may have some practical drawbacks. We compare two customer differentiation policies: stock reservation and pipeline stock priority for high priority customers. We derive exact analytical expressions of the waiting time distribution of both types of customers for a stock reservation policy. We then provide accurate approximation methods for a pipeline stock priority policy. By comparison, we offer insights concerning which method should be used under different service level requirements