A perishable inventory optimization model for two commodities in multi-echelon system

Abstract

In this article, we delve into the quest for an optimal solution within the realm of a practical inventory system, which serves as an integral component of a larger Multiechelon inventory system. Our study focuses on a warehouse (WH) that houses a single Distribution Center (DC) and a sole retailer (R) tasked with managing two distinct yet interconnected perishable products. This setup is modeled as a three-stage continuous review inventory system. At the retailer node, we implement an (s, S) inventory system, accommodating Poisson demand and exponentially distributed lead times. It’s important to note that the primary products are susceptible to perishing exclusively at the retailer node, characterized by a rate ζ, whereas the sub-products are non-perishable in nature. Deliveries to retailers occur in packs of Qi(= Si − si) units, originating from the distribution center (DC) with immediate replenishment capabilities sourced from the well-stocked warehouse (WH). Throughout our analysis, we rigorously maintain steady-state probability distributions and behavioral insights. Furthermore, we diligently collect and analyze performance measurements for the system under steady-state conditions. Our findings are showcased through numerical examples, shedding light on the practical implications of our inventory management approach.