Dynamic lateral transshipment policy of perishable foods with replenishment and recycling

Abstract

Considering the perishable nature of foods, avoiding overstocking and stockout is important for retailers to reduce operating costs and promote environmental sustainability. Traditional lateral transshipment policies focus on rebalancing inventory between retailers by applying redistribution combined with replenishment, but without considering recycling, which is an important tool in the management of perishable foods including fruits, vegetables, milk, and festival foods. In this work, we propose a lateral transshipment policy with both replenishment and recycling simultaneously, and model the inventory problem as a stochastic dynamic programming. We apply two different approximate dynamic programming methods to deal with the curse of dimensionality in the proposed model, and obtain the corresponding inventory policies including the decisions on lateral transshipment, replenishment and recycling. Finally, we test the two proposed inventory policies based on quasi-myopic approximation and look forward approximation by using amounts of random demand samples. The results show that both proposed policies are efficient in improving profitability and reducing waste. In addition, the results suggest that governments should pay more attention to the food regulatory framework.