Title: A dynamic programming model for perishable inventory management

Authors: Dipankar Mandal; Sri Vanamalla Venkataraman

Addresses: Department of Industrial and Management Engineering, Indian Institute of Technology Kanpur, Kanpur 208016, India ' Department of Industrial and Management Engineering, Indian Institute of Technology Kanpur, Kanpur 208016, India

Abstract: Perishable inventories have a limited lifetime and it may happen that a substantial quantity gets outdated and wasted leading to an additional cost due to outdating. In this paper, we develop a model which reduces such costs and hence increases the overall profit; we classify the entire lifetime of the products into two periods: in the first period a customer derives a higher utility from the product than from the second. In the traditional models discussed in literature, the net profit which is the difference between selling price and overall costs is maximised. Through this research, we propose a modification of this traditional model by varying the preferences of the product and hence its price over time. Under assumptions of stochastic demand we compare the traditional model with the modified model through numerical simulations. Our results indicate an improvement over the traditional model.

Keywords: inventory management; dynamic programming; perishable products.

DOI: 10.1504/IJOR.2019.100722

International Journal of Operational Research, 2019 Vol.35 No.2, pp.147 - 177

Received: 21 Dec 2015
Accepted: 15 Jun 2016
Published online: 17 Jul 2019 *

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