Occurrence based service-level constraints during a fiscal period

An occurrence-based service-level constraint, defined over a fiscal period, is introduced. This service-level constraint measures the actual number of stockout episodes and restricts it to a managerially acceptable level. It is shown that the solution to the emerging chance-constrained inventory problem is independent of the type and parameters of the demand distribution. The approach is demonstrated and its managerial implications, in particular with respect to reorder points, are discussed.