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A Heuristic Lot Size Reorder Point Model for Decaying Inventories

Author

Listed:
  • Steven Nahmias

    (Stanford University)

  • Shan Shan Wang

    (University of Pittsburgh)

Abstract

In this paper we consider the problem of finding a "good" lot size and reorder point policy for an inventory which is subject to continuous exponential decay. Examples of decaying inventories include alcohol, certain types of food items, and radioactive materials. The method of analysis is an approximate approach which parallels that of Hadley and Whitin in the no-decay case. To evaluate the effectiveness of the approximation, a computer simulation is developed to estimate and evaluate the best (Q, r) policy. A comparison of the approximate and simulated policies is made for a total of thirty test cases resulting in a maximum cost error of only 2.77%.

Suggested Citation

  • Steven Nahmias & Shan Shan Wang, 1979. "A Heuristic Lot Size Reorder Point Model for Decaying Inventories," Management Science, INFORMS, vol. 25(1), pages 90-97, January.
    • Handle: RePEc:inm:ormnsc:v:25:y:1979:i:1:p:90-97
    DOI: 10.1287/mnsc.25.1.90
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    Cited by:

    1. Emre Berk & Ülkü Gürler & Saeed Poormoaied, 2020. "On the $$\varvec{(Q,r)}$$(Q,r) policy for perishables with positive lead times and multiple outstanding orders," Annals of Operations Research, Springer, vol. 284(1), pages 81-98, January.
    2. Fredrik Olsson, 2014. "Analysis of inventory policies for perishable items with fixed leadtimes and lifetimes," Annals of Operations Research, Springer, vol. 217(1), pages 399-423, June.
    3. Zahra Azadi & Harsha Gangammanavar & Sandra Eksioglu, 2020. "Developing childhood vaccine administration and inventory replenishment policies that minimize open vial wastage," Annals of Operations Research, Springer, vol. 292(1), pages 215-247, September.
    4. Tekin, Eylem & Gurler, Ulku & Berk, Emre, 2001. "Age-based vs. stock level control policies for a perishable inventory system," European Journal of Operational Research, Elsevier, vol. 134(2), pages 309-329, October.
    5. Chiu, Huan Neng, 1995. "An approximation to the continuous review inventory model with perishable items and lead times," European Journal of Operational Research, Elsevier, vol. 87(1), pages 93-108, November.
    6. Lee, Jun-Yeon & Schwarz, Leroy B., 2007. "Leadtime reduction in a (Q,r) inventory system: An agency perspective," International Journal of Production Economics, Elsevier, vol. 105(1), pages 204-212, January.
    7. Chiu, Huan Neng, 1995. "A heuristic (R, T) periodic review perishable inventory model with lead times," International Journal of Production Economics, Elsevier, vol. 42(1), pages 1-15, November.
    8. Aswin Dhamodharan & Ruben Proano, 2012. "Determining the optimal vaccine vial size in developing countries: a Monte Carlo simulation approach," Health Care Management Science, Springer, vol. 15(3), pages 188-196, September.

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