Near Myopic Heuristics for the Fixed-Life Perishability Problem

Purushottaman Nandakumar and Thomas E. Morton
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Purushottaman Nandakumar: Fuqua School of Business, Duke University, Durham, North Carolina 27706
Thomas E. Morton: Graduate School of Industrial Administration, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213

Management Science, 1993, vol. 39, issue 12, 1490-1498

Abstract: This paper details the application of a class of heuristics to the Fixed-life Perishability Problem formulated by Nahmias (1975a) and Fries (1975). Various assumptions for this model include i.i.d. demand, linear ordering, holding and penalty costs. Goods have a known fixed lifetime and perished goods cause a linear outdating cost to be incurred. The approach we use, that of developing heuristics from 'near myopic' bounds, involves viewing periodic inventory problems in the framework of the classic "newsboy" model. We exploit various properties of the problem under consideration to derive tight bounds on the newsboy parameters, thus leading to efficient bounds on the order quantities. Computational studies reveal that the heuristic policies are near optimal, and are easy to compute.

Keywords: inventory control; infinite horizon dynamic programs; perishable inventory (search for similar items in EconPapers)
Date: 1993
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