Management of age differentiated perishable inventory

Abstract

This paper tackles the problem of periodic review of perishable inventory of extremely short shelf life characterized by age differentiation. The daily demand of items is highly stochastic which is differentiated by age, that is, the demand on young items is not the same as the demand on older items. This demand pattern can be found in applications such as oncology, transplantation and traumatology where the demand for blood is age differentiated. Items that are not consumed within the limited shelf life will be spoiled. In every period, the demand may exceed the available inventory, where shortage is recorded in this case. However, expedite service can be considered to satisfy the shortage as no backorders are allowed. Items that are not consumed get older day to day until they reach their maximum shelf life and eventually spoiled. To replenish the inventory, an optimal order up to level quantity will be found such that short and spoiled items are minimized. The motivation of such problem is its stochastic demand and age differentiated inventory system that makes the optimization of the model a challenging task. An optimization algorithm is presented to minimize the objective function; the model is tested for a shelf life of 2, 3, 4 and 5 days. The model output shows significantly promising results that outperform the ones found in some literature studies for this highly nonlinear and stochastic optimization problem.