(1, T) policy for a Two-echelon Inventory System with Perishable-on-the-Shelf Items

Authors

1 PhD Candidate, Industrial Engineering, Department of Industrial Engineering, Sharif University of Technology, Tehran, Iran

2 Associate Professor, Industrial Engineering, Department of Industrial Engineering, Sharif University of Technology, Tehran, Iran

Abstract

This paper deals with an i

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nventory system with one central warehouse and a number of identical retailers. We consider perishable-on-the-shelf items; that is, all items have a fixed shelf life and start to age on their arrival at the retailers. Each retailer faces Poisson demand and employs (1, T) inventory policy. Although demand not met at a retailer is lost, the unsatisfied demand at the central warehouse is backordered. In this study, the long-run system total cost rate is derived. Moreover, a proposition is proved to define a domain for the optimal solution. Also, a search algorithm is presented to obtain this solution. Further, we extend the existent paper of the well-known (S‑1, S) policy to cope with our considered model. Finally, in a numerical study, we compare (1, T) policy with (S‑1, S) policy in terms of system total cost. The results reveal that when transportation time from the central warehouse to the retailers is long, the (1, T) policy outperforms the (S‑1, S) policy.

Keywords