Abstract
We study a retailer selling perishable products with fixed lifetime. The retailer’s supply system is subject to random disruptions. Assuming a base-stock policy, deterministic demand and stationary cost parameters, we determine the expression for the optimal base-stock level. We show that if the retailer manages to make the system safer, it is possible to operate with the same expected cost even with products with shorter lifetimes. We conclude that the retailer should concentrate on reducing disruptions’ durations instead of their occurrence rate.
Highlights
Even well-managed supply chains can suffer from events resulting in supply disruptions
Only few works in the literature have considered the effects of disruptions on supply chains transporting perishable products. This is the first study to quantify the benefits of exercising the inventory mitigation strategy for a company carrying perishable products
We study a retailer carrying perishable products with fixed lifetime
Summary
Only few works in the literature have considered the effects of disruptions on supply chains transporting perishable products. This is the first study to quantify the benefits of exercising the inventory mitigation strategy for a company carrying perishable products. Most of the papers cited at these review articles try to either determine the best inventory replenishment policy or the parameters of a given replenishment policy under different assumptions on demand, transportation and cost structures. Our objective is to find the optimal base-stock level S∗, i.e. S that minimizes the expected cost per period C(S) Using this model as a base, in Sect. We determine the expression for C(S); with and without disruptions
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