Analysis of base-stock perishable inventory systems with general lifetime and lead-time

Photo : Analysis of base-stock perishable inventory systems with general lifetime and lead-time

Food waste is a major problem leading to overproduction, pollution and degradation of the environment.  For a better management of perishable inventories, we analyze a base-stock inventory model corresponding to inventories in shops with fruits and vegetables. Our study reveals important differences in performance evaluation when the common assumptions of deterministic or exponential lifetimes are used.  A better fit with the empirical lifetime of perishable products may lead to significant food savings! 

A base-stock inventory system for perishables with Markovian demand and general lead-time and lifetime distributions is investigated. Using a queueing network model, we derive explicit expressions of the stationary distribution of the inventory state together with the total expected cost in a base-stock system with lost-sales. Next, we show some monotonicity properties of the cost function and propose a procedure to derive the optimal base-stock.

Extensions to the backorders case and to a dual-sourcing system with multiple warehouses are also provided. Our results generalize existing ones from the literature where the lifetime and the lead-time follow either deterministic or exponential distributions. Finally, we investigate the effect of the lifetime and lead-time variability on the system cost and the optimal base-stock level. In particular, we show the substantial errors made when assuming deterministic or exponential distributions for the lifetime. This further shows the need to have results beyond exponential or deterministic assumptions.

Author(s)
  • Photo :

    Benjamin Legros Benjamin Legros is a Professor of Finance. He joined EM Normandie Business School in 2017. He has a PhD in management science from the Ecole CentraleSupélec, awarded in 2013. His thesis is on optimising flows in multichannel call centres. His research interests are stochastic models with applications centred around contact centre technologies and finance.

Photo : Global connectivity and local clustering of “Made-in-China” Aircraft

Global connectivity and local clustering of “Made-in-China” Aircraft

Characterized by world-leading economic growth, rising middle class with increasing income, increasing market openness to FDI, and strong policy support from the government, China fuels global investors with large market volume and fast-growing potential in the aerospace sector.  As the world’s second-largest civil aviation market, China maintains long-term above-average growth in the aerospace industry. According […]

Read More

Photo : Mobile channel as a strategic distribution channel in times of crisis: a self-determination theory perspective

Mobile channel as a strategic distribution channel in times of crisis: a self-determination theory perspective

The Covid-19 pandemic has profoundly disrupted the worldwide economy, particularly the restaurant sector. To face these challenges, the multi- and omni-channel approaches have been embraced by several firms, especially with the integration of mobile channels and social media. However, no research is conducted to investigate how this integration can be successful in times of crisis, […]

Read More

Photo : Acceptance of digital investment solutions: The case of robo advisory in Germany

Acceptance of digital investment solutions: The case of robo advisory in Germany

The financial services landscape is undergoing substantial change due to technological innovation and digitalization. The market entry of FinTechs (i.e. technology-based start-ups) intensifies competition in the financial industry: Banks struggle with innovation due to their legacy systems and the mindset of the organization where digitalization is not the top priority on the list. FinTechs on […]

Read More