Two warehouse dispatching policies for perishable items with freshness efforts, inflationary conditions and partial backlogging

Abstract

Application of freshness preservation technologies in case of perishable inventory management can play a vital role in mitigating the losses that occur due to deterioration of perishable inventory, typical perishable inventory includes Agri-fresh products like fresh fruits, fresh meat, fresh vegetables, seafood and packed foods. In case of perishable inventory price as well as freshness both decide the demand, so supplying a fresh product at a competitive price creates more customer satisfaction and makes a firm profitable. This paper develops two warehouse dispatching policies, first in, first out (FIFO) and last in, first out (LIFO) for perishable items taking deterioration into account. Demand varies as a function of price and freshness keeping effort. As the price increases and freshness keeping efforts decreases, demand decreases, and vice versa. Stockout is allowed, and during the stockout period as the waiting time increases backlogging rate decreases exponentially. Inflation is considered while calculating different costs. The objective of this paper is to determine the optimum price per unit item and lot size to maximize the profit. The sensitivity of the models is examined through the design of experiment. The present models are applicable for perishable items that start losing their quality immediately after arriving into the system.