A simple heuristic for perishable item inventory control under non-stationary stochastic demand

Alejandro Gutierrez-Alcoba, Roberto Rossi, Belen Martin-Barragan and Eligius M.T. Hendrix

International Journal of Production Research, 2017, vol. 55, issue 7, 1885-1897

Abstract: In this paper, we study the single-item single-stocking location non-stationary stochastic lot sizing problem for a perishable product. We consider fixed and proportional ordering cost, holding cost and penalty cost. The item features a limited shelf life, therefore we also take into account a variable cost of disposal. We derive exact analytical expressions to determine the expected value of the inventory of different ages. We also discuss a good approximation for the case in which the shelf-life is limited. To tackle this problem, we introduce two new heuristics that extend Silver’s heuristic and compare them to an optimal Stochastic Dynamic Programming policy in the context of a numerical study. Our results demonstrate the effectiveness of our approach.

Date: 2017
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DOI: 10.1080/00207543.2016.1193248

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