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A dynamic lot size model with perishable inventory and stockout

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  • Jing, Fuying
  • Chao, Xiangrui

Abstract

This research work deals with the single-item dynamic lot size problem under (i) age-dependent inventory deterioration rates and inventory costs and (ii) stockouts (or lost sales, that is, the demands do not have to be satisfied). Two equivalent forward dynamic programming (DP) algorithms are devised to solve this problem in O(T3) time based on several properties of the optimal solution, where T denotes the length of the problem horizon. Moreover, a special case with no speculative motive cost structures is investigated. Compared to the general time-variant case, two equivalent algorithms for efficient forward DP in O(T2) time are developed. Furthermore, we study the problem under storage capacity constraint and develop a forward DP algorithm to solve this problem. Finally, we offer two useful managerial insights by using a comprehensive test bed of instance: (i) the stockout policy can reduce the total costs when stockout costs are relatively small, and (ii) prolonging the product's lifetime or extending the storage capacity at great financial costs under smaller setup costs and higher holding costs for the firm is not needed.

Suggested Citation

  • Jing, Fuying & Chao, Xiangrui, 2021. "A dynamic lot size model with perishable inventory and stockout," Omega, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:jomega:v:103:y:2021:i:c:s030504832100030x
    DOI: 10.1016/j.omega.2021.102421
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    Cited by:

    1. Jing, Fuying & Chao, Xiangrui, 2022. "Forecast horizons for a two-echelon dynamic lot-sizing problem," Omega, Elsevier, vol. 110(C).
    2. Daniela Favaretto & Alessandro Marin & Marco Tolotti, 2023. "A theoretical validation of the DDMRP reorder policy," Computational Management Science, Springer, vol. 20(1), pages 1-28, December.
    3. Mingyang Zhang & Xufeng Yang & Taichiu Edwin Cheng & Chen Chang, 2022. "Inventory Management of Perishable Goods with Overconfident Retailers," Mathematics, MDPI, vol. 10(10), pages 1-14, May.
    4. Daniela Favaretto & Alessandro Marin & Marco Tolotti, 2021. "A data-driven and risk-based prudential approach to validate the DDMRP planning and control system," Working Papers 09, Department of Management, Università Ca' Foscari Venezia.
    5. Fan, Jie & Ou, Jinwen, 2023. "On dynamic lot sizing with bounded inventory for a perishable product," Omega, Elsevier, vol. 119(C).

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