Operating Characteristics of an Inventory System with Rationing

This paper considers an inventory system which maintains stock to meet both high and low priority demands. This model is suggested by the operation of a spare parts pool in a military depot: high priority demands are those which might result in the grounding of an aircraft, for example, while low priority demands are those which arise from the routine restocking of base level inventories. We analyze the following type of control policy: there is a support level, say K > 0, such that when the level of on hand stock reaches K, all low priority demands are backordered while high priority demands continue to be filled. Both continuous review and periodic review systems are considered. The objective of the analysis is to develop methods for comparing fill rates when there is rationing and when there is no rationing for specified values of the reorder point, order quantity and support level.