An embedded Markov chain approach to stock rationing under batch orders

Abstract

We provide an extension to the embedded Markov chain approach of Fadiloglu and Bulut (2010) for the analysis of lot-per-lot inventory systems with backorders under rationing. This extension generalizes the method so that it can be used for the analysis under (Q R) policy. We introduce a new embedded Markov chain of higher dimensionality that keeps track of the ordering process. We finally provide a recursive procedure to generate the steady-state probabilities from the chain and obtain the steady-state distribution. (C) 2018 Elsevier B.V. All rights reserved.