AbstractWe present a service constrained (Q, r) model that minimizes expected holding and ordering costs subject to an upper bound on the expected waiting time of demands that are actually backordered. We show that, after optimizing over r, the average cost is quasiconvex in Q for logconcave continuous lead time demand distributions. For logconcave discrete lead time demand distributions we find a single‐pass efficient algorithm based on a novel search stopping criterion. The algorithm also allows for bounds on the variability of the service measure. A brief numerical study indicates how the bounds on service impact the optimal average cost and the optimal (Q, r) choice. The discrete case algorithm can be readily adapted to provide a single pass algorithm for the traditional model that bounds the expected waiting time of all demands (backordered or not). © 2002 Wiley Periodicals, Inc. Naval Research Logistics 49: 557–573, 2002; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/nav.10028