(S - 1, S) Policies for Perishable Inventory

Charles P. Schmidt and Steven Nahmias
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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

Management Science, 1985, vol. 31, issue 6, 719-728

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.

Keywords: inventory/production: perishable items; stochastic processes; scheduled maintenance (search for similar items in EconPapers)
Date: 1985
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