Achieving High Individual Service Levels Without Safety Stock? Optimal Rationing Policy of Pooled Resources

In “Achieving High Individual Service-Levels without Safety Stock? Optimal Rationing Policy of Pooled Resources,” Jiang, Wang, and Zhang analyze a resource rationing problem with service level constraints. They present a general framework to study the two-stage problem when customers require individual and possibly different service levels: (1) the capacity level of pooled resources in anticipation of random demand of multiple customers and (2) how the capacity should be allocated to fulfill customer demands after demand realization. The modeling framework generalizes and unifies many existing models in the literature and includes second-stage allocation costs. The authors propose a simple randomized rationing policy for any fixed feasible capacity level and show the optimality of this policy for very general service level constraints, including type I and type II constraints and beyond. They also discuss the optimality of index policies.