Product Selection Policies for Perishable Inventory Systems

Abstract

A comparison is made of the performance characteristics of perishable inventory systems with LIFO and FIFO selection policies. For each system one has Poisson arrivals to inventory and Poisson demand epochs with known rates and deterministic shelf life. The comparison requires development of a new analytical framework for the LIFO systems and extension of earlier results on the FIFO systems via Green's function methods. The performance characteristics derived for both policies are spoilage rate, loss sales rate, mean time between stockouts, inventory level on hand and the distribution of age of items delivered. In particular, the dependance of these characteristics on the replenishment rate, demand rate and shelf life are evaluated both theoretically and numerically. Several important management implications are explored and discussed.