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Effects of Consumer Demand, Product Lifetime, and Substitution Ratio on Perishable Inventory Management

Author

Listed:
  • Linh N. K. Duong

    () (Duy Tan University, Da Nang, Vietnam)

  • Lincoln C. Wood

    () (Department of Management, University of Otago, Dunedin 9054, New Zealand
    Logistics Research Cluster, Curtin University, Bentley 6102, Australia)

  • William Y. C. Wang

    () (Department of Management Systems, University of Waikato, Hamilton 3240, New Zealand)

Abstract

With the intensification of global population, food security is a big concern. Food waste stems from inappropriate inventory management. Companies offer a wide range of products to capture more sales, yet this increases inventories and complicates inventory management. Management challenges are worsened by three factors: uncertain consumer demand, product lifetimes, and consumer substitution among the product range. This research aims to understand the effects of these factors on inventory performance. The analytic hierarchy process (AHP) method was used to weight the importance of each of the non-financial performance measures from the simulation results and data envelopment analysis (DEA) was used to rank and evaluate the scenarios. Then, the most favorable scenario or replenishment policy, which had the lowest DEA efficiency score, was chosen. The results show that when the substitution ratio is greater, its interaction with consumer demand and product lifetime has mostly a small- or medium-sized effect on retailers’ performance, in contrast to relatively larger effects on the supplier. These findings show that suppliers’ performance is affected largely by the existence of the bullwhip effect in the model. Recommendations are provided for managers who are facing uncertainties of consumer demand, substitution, and product lifetime.

Suggested Citation

  • Linh N. K. Duong & Lincoln C. Wood & William Y. C. Wang, 2018. "Effects of Consumer Demand, Product Lifetime, and Substitution Ratio on Perishable Inventory Management," Sustainability, MDPI, Open Access Journal, vol. 10(5), pages 1-1, May.
  • Handle: RePEc:gam:jsusta:v:10:y:2018:i:5:p:1559-:d:146242
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    References listed on IDEAS

    as
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    Cited by:

    1. Mingyuan Wei & Hao Guan & Yunhan Liu & Benhe Gao & Canrong Zhang, 2020. "Production, Replenishment and Inventory Policies for Perishable Products in a Two-Echelon Distribution Network," Sustainability, MDPI, Open Access Journal, vol. 12(11), pages 1-1, June.

    More about this item

    Keywords

    inventory; perishable inventory; substitution; non-financial measures; discrete-event simulation; analytical hierarchy process; data envelopment analysis;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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