A dynamic lot size model with perishable inventory and stockout. (September 2021)

• Record Type: Journal Article
• Authors: Jing, Fuying; Chao, Xiangrui
• Is Part Of: Omega. Volume 103(2021)
• Publication Date: 2021-09
• Subjects: Dynamic lot size -- Perishable product -- Stockouts -- Storage capacity; Management -- Periodicals; 658.4005
• DOI: 10.1016/j.omega.2021.102421
• Languages: English
• ISSNs: 0305-0483

Abstract

Highlights: Establish a dynamic lot size model with perishable inventory and stockout. Devise a DP algorithm to solve the presented problem in polynomial time. Special case and extended problem can be polynomially solved. Three managerial insights on perishable inventory and stockout are revealed. Abstract: This research work deals with the single-item dynamic lot size problem under (i) age-dependent inventory deterioration rates and inventory costs and (ii) stockouts (or lost sales, that is, the demands do not have to be satisfied). Two equivalent forward dynamic programming (DP) algorithms are devised to solve this problem in O ( T 3 ) time based on several properties of the optimal solution, where T denotes the length of the problem horizon. Moreover, a special case with no speculative motive cost structures is investigated. Compared to the general time-variant case, two equivalent algorithms for efficient forward DP in O ( T 2 ) time are developed. Furthermore, we study the problem under storage capacity constraint and develop a forward DP algorithm to solve this problem. Finally, we offer two useful managerial insights by using a comprehensive test bed of instance: (i) the stockout policy can reduce the total costs when stockout costs are relatively small, and (ii) prolonging the product's lifetime or extending the storage capacity at great financial costs under smaller setup costs and higher holding costs for the firm is not needed.