Anticipated rationing policy for two demand classes under service level constraints

This paper considers a periodic-review, infinite-horizon, backorder inventory model with two demand classes, where a base-stock policy controls replenishment. We propose an easy-to-use rationing policy, which reserves inventory for future high priority demands by taking the coming delivery of the next period into consideration, hence called anticipated rationing policy. By applying a multidimensional Markov chain approach, we are able to evaluate system performance exactly. We also derive structural results and find optimal solutions for both α-service level and γ-service level constraint problems. A numerical comparison study demonstrates the effectiveness of anticipated rationing policy, where the well-known constant level rationing policy serves as the benchmark.

► We propose a new rationing policy for two-demand-class inventory system. ► We model the system as a Markov chain and evaluate system performance exactly. ► We construct a searching approach for finding the optimal solutions. ► The numerical results show the effectiveness of the new policy.