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 alpha-service level and gamma-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. (C) 2013 Elsevier Ltd. All rights reserved.