Heuristics for perishable inventory systems under mixture issuance policies

Abstract

We consider a periodic review inventory control problem of perishable goods with a fixed lifetime. Instead of considering either FIFO or LIFO issuance policy, we incorporate customers’ behavior in the retail setting using a mixture of FIFO and LIFO issuance policy. First, we characterize properties of inventory transitions under a mixture of FIFO and LIFO policies and show that the sequence of demand arrival does not influence the inventory state at the end of the period. Second, we study the properties of optimal solutions under different issuance policies to gain insights for heuristic designs under mixture issuance policies. Third, we propose a two-stage heuristic for the LIFO policy, demonstrating its approximation accuracy through comparison with optimal solutions. Building on this, we design an effective heuristic for the mixture issuance policy by combining heuristics for both FIFO and LIFO policies. The numerical experiments with stationary and nonstationary demand validate the performance of our proposed heuristics against alternative heuristics across various issuance policies.