VENDOR MANAGED INVENTORY POLICY FOR PERISHABLE PRODUCTS UNDER A COMBINATION OF FIFO-LIFO STOCK CONTROL

Abstract

For retailing systems, arranging the perishable products has always been a challenge. Although more profit is made when products are sold with a FIFO policy, now customers taste in a competitive market which requires new products to be offered to them has changed the game. This paper considers a hybrid of FIFO-LIFO strategies for controlling a retailer's stock and its impact on the profits of the vendor managed inventory contracts. The problem is formulated as a multi-period, multi-store integer programming model which aims to maximize the total profit. The proposed model considers different selling prices and different holding costs for perishable products according to their remaining shelf life. A dynamic programming with a backward strategy is proposed to find the optimal order quantity for each store. The numerical experiments confirm the applicability and efficiency of the model illustrating impact of the crucial parameters of the model on the stocking policy.