Managing Perishable Inventory Systems as Non-Perishable Ones

Abstract

Perishable inventory problems have a long history and involve two fundamental decisions, how much to order and how much old inventory to clear before expiration, that are known to be difficult to optimize due to the curse of dimensionality. Most early work ignores the clearance decision and focuses solely on the ordering decision until recently where heuristic clearance policies have been developed. In this paper, we approach the problem from a different angle by exploring its asymptotic behavior, i.e., perishability can be ignored in many cases and hence clearance of inventory is not necessary except at the beginning of the planning horizon when a system is large enough. Inspired by such asymptotic behavior, we examine simple policies that ignore clearance under minor conditions and establish theoretical bounds for them. The bounds not only vanish asymptotically, but also indicate a system size required to guarantee any given optimality gap. Numerical studies suggest that such policies can work very well for systems with reasonable sizes and practical management of complex perishable inventory systems is not so much harder than that of non-perishable ones.