Dynamic rationing and ordering policies for multiple demand classes

Authors:
Ek Peng Chew;Loo Hay Lee;Shudong Liu
Affiliations:
Department of Industrial and Systems Engineering, National University of Singapore, Singapore, Singapore 119260;Department of Industrial and Systems Engineering, National University of Singapore, Singapore, Singapore 119260;Department of Industrial and Systems Engineering, National University of Singapore, Singapore, Singapore 119260
Venue:
OR Spectrum
Year:
2013

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Abstract

In this paper, we study the dynamic rationing problem for multiple demand classes with Poisson demands. We first consider a multi-period problem with zero lead time and show that the optimal rationing and ordering policies are, respectively, the dynamic rationing policy and the base stock policy. We then extend this model to a non-zero lead time and show that there is no simple optimal structure for this extended problem. A myopic policy and a lower bound are proposed. The numerical results show that the dynamic rationing policy outperforms the static rationing policy and its performance is very close to the optimal policy under a wide range of operating conditions.