Retail Inventory Management for Perishable Products with Two Bins Strategy
Perishable goods constitute a large portion of retailer inventory and lose value with time due to deterioration and/or obsolescence. Retailers dealing with such goods required considering the factors of short shelf life and the dependency of sales on inventory displayed in determining optimal procurement policy. Many retailers follow the practice of using two bins - primary bin sales fresh items at a list price and secondary bin sales unsold items at a discount price transferred from primary bin on attaining certain age. In this paper, mathematical models are developed for primary bin and for secondary bin that maximizes profit with decision variables of order quantities, optimal review period and optimal selling price at secondary bin. The demand rates in two bins are assumed to be deterministic and dependent on displayed inventory level, price and age but independent of each other. The validity of the model is shown by solving an example and the sensitivity analysis of the model is also reported.
Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1057819Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 3069
 S. Nahmias, S. "Perishable Inventory Theory: A review", Operations Research, vol.30, 680-708, 1982.
 F. Raafat, "Survey of literature on continuously deteriorating inventory models," Journal of the Operational Research Society, vol. 42(1), 27-37, 1991.
 S. K. Goyal, and B.C. Giri, "Recent trends in modelling of deteriorating inventory," European Journal of Operational Research, vol. 134(1), 1- 16, 2001.
 H. B. Wolfe, "A model for control of style merchandise," Industrial Management Review, vol.9 (2), 69-82, 1968.
 R.I. Levin, and C.A. McLaughlin, Productions/Operations Management: Contemporary Policy for Managing Operating Systems, McGraw-Hill, New York, 1972.
 E. Silver and R. Peterson, Decision Systems for Inventory Management and Production Planning, Wiley, New York, 1985.
 R. Gupta, and P. Vrat, "Inventory models for stock dependent consumption rate," Opsearch, vol. 23(1), 19-24, 1986.
 R.C. Baker and T. Urban, "A Deterministic inventory system with an inventory-level-dependent demand rate," Journal of the Operational Research Society, vol. 39(9), 823-831, 1988.
 T.K. Datta and A.K. Pal, "A note an inventory model with inventorylevel dependent rate," Journal of Operational Research Society, 41(10), 971-975, 1990.
 G. Padmanabhan and P. Vrat, "EOQ model for perishable items under stock dependent selling rate," European Journal of Operational Research, vol.86 (2), 281-292, 1995.
 H. Soni and N. Shah, "Optimal ordering policy for stock-dependent demand under progressive payment scheme," European Journal of Operational Research, vol.184 (1), 91-100, 2008.
 T. Urban, "An inventory model with an inventory-level-dependent demand rate and relaxed terminal conditions," Journal of the Operational Research Society, vol.43 (7), 721 - 724, 1992.
 P. D. Larson, and R. A. DeMarais, "Psychic stock: An independent variable ategory of inventory," International Journal of Physical Distribution and Logistics Management, vol.29 (8), 495 - 507, 1999.
 S. Smith and D. Achabal, "Clearance Pricing and Inventory Policies for Retail Chains," Management Science, vol. 44(3), 285-300, 1998.
 M. Nagare, and P. Dutta, "Continuous review model for perishable products with inventory dependent demand", Proceedings of the International Multi-Conference of Engineers and Computer Scientists 2012, Vol II, IMECS 2012, March 14-16, 2012, Hong Kong.
 P. Dutta, A. Kambli, and A. Grover, "Cost and life-cycle analysis of perishable products," Master-s Thesis submitted to IIT Bombay, 2010.
 S. Kar, A. K. Bhunia, and M. Maiti, "Inventory of multi-deteriorating items sold from two shops under single management with constraints on space and investment," Computers & Industrial Engineering, vol.28, 1203- 1221, 2001.
 K. Das, and M. Maiti, "Inventory of a price and lot differential item sold from two shops under single management with shortages and variable demand," Applied Mathematical Modelling, vol.27, 535-549, 2003.
 H. Hwang and H. Kyu, "An optimal procurement policy for items with an inventory level-dependent demand rate and fixed lifetime," European Journal of Operational Research, vol.127, 537-545, 2000.
 S. Han, Y. Oh, and H. Hwang, "Retailing policy for perishable item sold from two bins," APIEMS, pp.2623-2629, 2009.
 S. Han, Y. Oh, and H. Hwang, "Retailing policy for perishable item sold from two bins with mixed issuing policy," Journal of Intelligent Manufacturing, vol. 23(6), 2215-2226. 2012.