An embedded Markov chain approach to stock rationing

Rationing is an inventory policy that allows prioritization for different demand classes. This prioritization results in a different service level for each demand class. The mechanism through which the rationing policy is implemented is to stop serving lower priority classes when the inventory on hand drops below a certain critical level. Under this level, only higher priority classes are served. The same critical level can also be used for clearing backorders. This clearing mechanism is called priority clearing. In this paper, we present a new method for the analysis of continuous-review inventory systems with backordering under ( ) 1, S S − ordering policy and critical level stock-rationing with