Threshold inventory rationing policy for multiple customer demand classes (Q1758837)

Summary: In this paper, we consider an inventory rationing policy for multiple customer demand classes with unique arrival rates under continuous review environment. The scheme is characterised by a set of monotone threshold inventory levels, which gives the indications when to reserve stock for higher priority customer classes. The proposed inventory policy serves all customers on a first come first serve (FCFS) basis until the on-hand inventory is above the threshold levels, and cut-off the services of the lower priority customers when on-hand inventory falls below the threshold level of the customer class. The threshold rationing policy studied here can be proposed as a way to avoid the problems inherent in the roundup policy while still taking the advantage of inventory pooling. First we analyse this static policy under a special threshold clearing mechanism to fill the backlog, and then to calculate the policy parameter we develop an efficient algorithms.