Are All Customers Created Equal? A Multiple Demand Class Inventory Case Benjamin Neve , The University of Alabama Marco Lam, Ph.D., York College of Pennsylvania ABSTRACT Sparked by the interest that revenue management has received in the airline industry, multiple demand classes, customer differentiation, and inventory rationing is being revisited by scholars. Because of its novelty, multiple demand classes are not covered in inventory management or operations management textbooks. This teaching case is targeted for use in an introductory operations management class or as an introduction for an inventory management class and does not require the students to have prior knowledge of inventory management concepts and vocabulary. The case guides students through the conceptual issues while the instructor can add the vocabulary and concepts where and when necessary. The case can be used for class discussion and as a homework or group assignment. In the first part of the case we provide a framework for introducing basic inventory concepts like service levels, holding costs, periodic versus continuous review policies, forecasting, order quantities, lead times, safety stock, and backordering. In the second part of the case, we introduce the notion that inventory shortage costs are not the same for all customers. This leads into the concepts of customer differentiation and multiple demand classes. COMPANY BACKGROUND AND HISTORY Bama Drinks is the main distributor of a raspberry-flavored soda called Crimson Soda that is sold in 20 oz. bottles with the image of an elephant on the packaging. The Bama Drinks distribution company was organized in the fall of 1993 as a joint venture between, Flores, a soft-drink giant and, Sasamoto Oil, a regional company that owns a chain of convenience stores. The original idea was to sell Crimson Soda to fans of the successful Crimson Tide football program in the southern states, but the drink turned out to be more popular than anticipated. The two companies decided to join forces by setting up a dedicated distribution center, Bama Drinks, to successfully meet demand for the popular drink. The Bama Drinks distribution center, originally an auto parts warehouse, is located in Athens, Georgia and was initially leased by Flores both to house inventory and to act as the main shipping hub. From the warehouse, Crimson Soda was transported to