Abstract
In this paper we propose a new discrete time discrete state inventory model for perishable items of a single product. Items in stock are assumed to belong to one of a finite number of quality classes that are ordered in such a way that Class 1 contains the best quality and the last class contains the pre-perishable quality. By the end of each epoch, items in each inventory class either stay in the same class or lose quality and move to a lower class. The movement between classes is not observed. Samples are drawn from the inventory and based on the observations of these samples, optimal estimates for the number of items in each quality classes are derived.
Highlights
In this paper, we propose a new discrete time, discrete state inventory model for perishable items of a single product
By the end of each epoch n, due to uncontrollable factors, some items in Class i may move to Class (i + 1) signaling the fact that the items have moved to a lower quality class, i = 1, . . . , K
It is certainly desirable for most practitioners and managers of stock to have an idea about the level of stock of each quality class
Summary
We propose a new discrete time, discrete state inventory model for perishable items of a single product. It is certainly desirable for most practitioners and managers of stock to have an idea about the level of stock of each quality class. Our approach in tackling the proposed problem hinges on the so called Change of Measures Techniques This basically means that the real world probability measure on which the inventory model was introduced is transformed by a technical artifice to another probability measure where various technical derivations are made easy.
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