Value of capacity pooling in supply chains with heterogeneous customers

We investigate the value of pooling capacity in supply chains that serve product demands of different variabilities. We build and analyze models that integrate production queuing models with base stock inventory systems serving demands with different inter-arrival time distributions. The first model combines hyperexponential and exponential demand inter-arrival time distributions. Exact analysis of the model allows us to develop insights into the impact of the difference in demand variabilities on the value of pooling capacity. Simulation experiments allow us to validate these insights for more general settings. We then find one special case that combines exponential and deterministic demand arrivals with deterministic service, where pooling capacity results in increasing the total cost. (c) 2006 Elsevier B.V. All rights reserved.