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(S - 1, S) Policies for Perishable Inventory

Author

Listed:
  • Charles P. Schmidt

    (College of Commerce and Business Administration, University of Alabama, University, Alabama 35486)

  • Steven Nahmias

    (Department of Decision and Information Science, University of Santa Clara, Santa Clara, California 95053)

Abstract

We consider (S - 1, S) policies for a single item whose lifetime is fixed and known with certainty. Demands are generated by a stationary Poisson process and there is a positive leadtime for replenishment. We believe this study gives the only analysis for perishables with a positive order leadtime. The analysis involves the derivation of the stationary distribution of the S-dimensional stochastic process corresponding to the time elapsed since the last S orders were placed. This distribution is then used to obtain an expression for the expected cost rate of operating the system in steady state as a function of S. A computer program has been developed to compute optimal S values and expected annual costs. We report a computation for a variety of system parameters which show some of the unusual features of the problem. Finally, we show how this model can be used in the context of a problem of optimizing availability of operating equipment subject to scheduled maintenance as well as random failure.

Suggested Citation

  • Charles P. Schmidt & Steven Nahmias, 1985. "(S - 1, S) Policies for Perishable Inventory," Management Science, INFORMS, vol. 31(6), pages 719-728, June.
    • Handle: RePEc:inm:ormnsc:v:31:y:1985:i:6:p:719-728
    DOI: 10.1287/mnsc.31.6.719
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