Inventory management of perishable products with fixed shelf life for a single echelon system

Abstract

Perishable goods play an important role in our daily lives as well as in the retail industry. For products such as bakery goods, inventory optimization is very much important as it has a shorter shelf life and uncertain demand due to dynamic consumer behaviour. Baked products are as popular as they've ever been, however, consumer demand is shifting in fascinating ways. Consumers are more conscious about their health than ever before and their demand for fresh foods has skyrocketed. There lies the importance of requirement of an effective inventory management system in the bakery sector to provide fresh products reducing the wastage. Mathematical formulation is framed for a single echelon system considering only the retailer with bread as an example. Two methods of inventory management are being compared, in the first one, the entire inventory is available in rack on the beginning of the day, whereas in the second case a reservation policy is being introduced. The best base-stock level of bread to be kept by the retailer for the above two cases are tested with two ordering policies namely order-up-to-S and (s, S) policies. Demand streams are generated following uniform distribution, as it gives equal probability over a given range.