Perishables Inventory Management Model with Backroom Effect

Abstract

This paper considers two storage locations (shelf and backroom) in supermarket selling perishable products. Due to the backroom effect, the products with higher freshness are periodically replenished from backroom to shelf, where freshness-and-shelf level-sensitive consumers purchase the products according to their "perceived average freshness" of displayed fresh products. Based on the analysis of dual-sensitive demand, this paper formulates the functions of "consumer perceived freshness" and inventory level on both shelf and backroom. Then it develops the decision-making model including shelf replenishment period and reorder point, and the neighborhood search algorithm is designed to solve this model. Finally, it conducts groups of numerical examples revealing the impact of the backroom effect on the retailer's optimal order quantity, shelf replenishment period, and reorder point (stock level when ordering from suppliers). The main results show that retailers who ignore the backroom effect will miss out on market share and profit margins. When the retailer realizes the existence of the backroom effect, he should increase the order quantity to obtain a higher profit value.