LQ optimal control of periodic review perishable inventories with transportation losses

Abstract

In this paper an LQ optimal warehouse management strategy is proposed. The strategy not only explicitly takes into account decay of commodities stored in the warehouse (perishable inventory) but it also accounts for transportation losses which take place on the way from supplier to the warehouse. The proposed strategy ensures full customers’ demand satisfaction and prevents from exceeding the warehouse capacity. Moreover, it guarantees that the ordered quantities of goods are bounded and it helps achieve good trade-off between fast reaction of the system to time-varying demand and the big volume of the ordered goods. These favourable properties of the proposed strategy are formally stated as three theorems and proved in the paper.