Blood platelet inventory management with protection levels

We consider a discrete-time inventory system for a perishable product where demand exists for product of different ages; an example of such a product is blood platelets. In addition to the classical costs for inventory holding, outdating, and shortage, our model includes substitution (mismatch) costs incurred when a demand for a certain-aged item is satisfied by a different-aged item. We propose a simple inventory replenishment and allocation heuristic to minimize the expected total cost over an infinite time horizon. In our heuristic, inventory of the newest items is replenished in fixed quantities and the newest items are protected for future use by limiting some substitutions when making allocation decisions according to a critical-level policy. We model our problem as a Markov Decision Process (MDP), derive the costs of our heuristic policy, and computationally compare this policy to extant “near optimal” policies in the literature. Our extensive computational study shows that our policy leads to superior performance compared to existing heuristics in the literature, particularly when supplies are limited.