Optimal inventory rationing policy under service differentiation for multiple customer classes with deterministic demand

In this paper, we consider inventory rationing policies for a single product with multiple customer classes. Demand for the product from each customer class occurs at a constant deterministic rate. The customers are segmented into different classes based on the penalty cost of backordering the demand. It is assumed that the demand is backordered for a customer class after its run‐out time and satisfied only when the next replenishment arrives. The problem of determining the inventory rationing policy involves finding the cycle time for replenishment of the product and the run‐out time for each customer class. An algorithm is developed to determine the optimal inventory rationing policy.