Deterioration control decision support for perishable inventory management

Abstract

Deterioration rate is an important characteristic of perishable products. While deterioration in perishables is unavoidable, there are proven ways to lower their deterioration rates. Deterioration rate is commonly treated as an exogenous parameter in extant inventory management literature. We define deterioration rate as one of the controllable variables and propose a novel freshness-preservation effort (FPE) indicator. We consider perishable inventory management with FPE for deterioration control decision support. Our results show that there exists an optimal order quantity that minimizes total cost for a controlled deterioration scenario. The optimal FPE indicator value and the optimal order quantity are investigated through numerical analysis. We perform sensitivity analysis and conclude with related managerial implications.