IDEAS home Printed from https://ideas.repec.org/a/bla/popmgt/v28y2019i9p2305-2322.html
   My bibliography  Save this article

Managing Perishable Inventory Systems with Multiple Priority Classes

Author

Listed:
  • Hossein Abouee‐Mehrizi
  • Opher Baron
  • Oded Berman
  • David Chen

Abstract

Preferences for different ages of perishable products exist in many applications, including grocery items and blood products. In this paper, we study a multi‐period stochastic perishable inventory system with multiple priority classes that require products of different ages. The firm orders the product with a positive lead time and sells it to multiple demand classes, each only accepting products with remaining lifetime longer than a threshold. In each period, after demand realization, the firm decides how to allocate the on‐hand inventory to different demand classes with different backorder or lost‐sale cost. At the end of each period, the firm can dispose inventory of any age. We formulate this problem as a Markov decision process and characterize the optimal ordering, allocation, and disposal policies. When unfulfilled demand is backlogged, we show that the optimal order quantity is decreasing in the inventory levels and is more sensitive to the inventory level of fresher products, the optimal allocation policy is a sequential rationing policy, and the optimal disposal policy is characterized by n − 1 thresholds. For the lost‐sale case, we show that the optimal allocation and disposal policies have the same structure but the optimal ordering policy may be different. Based on the structure of the optimal policy, we develop an efficient heuristic with a cost that is at most 4% away from the optimal cost in our numerical examples. Using numerical studies, we show that the ordering and allocation policies are close to optimal even if the firm cannot intentionally dispose products. Moreover, ignoring the differences between demand classes and using simple allocation policy (e.g., FIFO) can significantly increase the total cost. We examine how the firm can improve the control of perishable items and show that the benefit of decreasing the lead time is more significant than that of increasing the lifetime of the products or that of decreasing the acceptance threshold of the demand. The analysis is extended to systems with age dependent disposal cost and with stochastic supply.

Suggested Citation

  • Hossein Abouee‐Mehrizi & Opher Baron & Oded Berman & David Chen, 2019. "Managing Perishable Inventory Systems with Multiple Priority Classes," Production and Operations Management, Production and Operations Management Society, vol. 28(9), pages 2305-2322, September.
  • Handle: RePEc:bla:popmgt:v:28:y:2019:i:9:p:2305-2322
    DOI: 10.1111/poms.13058
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/poms.13058
    Download Restriction: no

    File URL: https://libkey.io/10.1111/poms.13058?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fredrik Ødegaard & Sudipendra Nath Roy, 2021. "Heuristic-based allocation of supply constrained blood platelets in emerging economies," Journal of Heuristics, Springer, vol. 27(5), pages 719-745, October.
    2. Sasanuma, Katsunobu & Delasay, Mohammad & Pitocco, Christine & Scheller-Wolf, Alan & Sexton, Thomas, 2022. "A marginal analysis framework to incorporate the externality effect of ordering perishables," Operations Research Perspectives, Elsevier, vol. 9(C).
    3. Mahmood Vahdani & Zeinab Sazvar & Kannan Govindan, 2022. "An integrated economic disposal and lot-sizing problem for perishable inventories with batch production and corrupt stock-dependent holding cost," Annals of Operations Research, Springer, vol. 315(2), pages 2135-2167, August.
    4. 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.
    5. Hossein Abouee‐Mehrizi & Mahdi Mirjalili & Vahid Sarhangian, 2022. "Data‐driven platelet inventory management under uncertainty in the remaining shelf life of units," Production and Operations Management, Production and Operations Management Society, vol. 31(10), pages 3914-3932, October.
    6. Li‐Ming Chen & Amar Sapra, 2021. "Inventory renewal for a perishable product: Economies of scale and age‐dependent demand," Naval Research Logistics (NRL), John Wiley & Sons, vol. 68(3), pages 359-377, April.
    7. Shouchang Chen & Yanzhi Li & Yi Yang & Weihua Zhou, 2021. "Managing Perishable Inventory Systems with Age‐differentiated Demand," Production and Operations Management, Production and Operations Management Society, vol. 30(10), pages 3784-3799, October.
    8. Chua, Geoffrey A. & Senga, Juan Ramon L., 2022. "Blood supply interventions during disasters: Efficiency measures and strategies to mitigate volatility," Socio-Economic Planning Sciences, Elsevier, vol. 84(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:popmgt:v:28:y:2019:i:9:p:2305-2322. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1937-5956 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.