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Inventory strategies for perishable products with two-period shelf-life and lost sales

Author

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  • Kebing Chen
  • Tiaojun Xiao
  • Shengbin Wang
  • Dong Lei

Abstract

We develop an inventory model for perishable products with a two-period shelf-life. The demand during a stock out in either period is treated as lost sales. Besides the initial regular order, the manager also has an opportunity to adjust the mid-cycle inventory with either expedited order or returns. An expedited order plan allows the manager to place an emergency order if the mid-cycle leftover inventory is low, while a returns plan offers the manager a chance to return some units within the validity period to suppliers if the leftover inventory is high. We show that both adjustment plans have their own thresholds, which exhibit a similar policy to that in the classical newsvendor model. Due to the dynamics of inventory, we investigate how the regular order is affected by each adjustment plan. Our findings indicate that the expedited order plan has a better performance in controlling the wastage risk, but it results in a higher shortage risk than the returns plan. Considering the respective advantages of the two plans, we show the existence of a new plan that is the combination of the two and justify the motivation for the manager to use it in the perishable inventory management.

Suggested Citation

  • Kebing Chen & Tiaojun Xiao & Shengbin Wang & Dong Lei, 2021. "Inventory strategies for perishable products with two-period shelf-life and lost sales," International Journal of Production Research, Taylor & Francis Journals, vol. 59(17), pages 5301-5320, September.
    • Handle: RePEc:taf:tprsxx:v:59:y:2021:i:17:p:5301-5320
    DOI: 10.1080/00207543.2020.1777480
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    Cited by:

    1. Erkan Köse & Ahsen Korkmazer & Danışment Vural & Gökçe Gül Gökceoğlu & Pınar Şavlı, 2023. "Simultaneous pickup and delivery model suggestion for personnel transportation in COVID-19 pandemic conditions," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 33(4), pages 119-131.
    2. Zhou, Haijie & Chen, Kebing & Wang, Shengbin, 2023. "Two-period pricing and inventory decisions of perishable products with partial lost sales," European Journal of Operational Research, Elsevier, vol. 310(2), pages 611-626.
    3. Yonit Barron, 2024. "Shortage Policies for a Jump Process with Positive and Negative Batch Arrivals in a Random Environment," Mathematics, MDPI, vol. 12(9), pages 1-30, April.

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