Stock optimization for service differentiated demands with fill rate and waiting time requirements

Abstract

We develop a computationally efficient optimization procedure to optimize stock and rationing levels for a model consisting of a single product with two priority–demand classes, given by mutually independent, stationary, Poisson demand processes. Each priority class has its own service levels requirements, defined by the class-specific fill rate and expected waiting-time levels. Order lead times are independent and identically distributed random variables. This is the first study in this setting to consider both waiting-time constraints along with fill rate requirements.