Pricing And Inventory Control Policies For Perishable Products PDF Download

The retail food industry has sales of over a trillion dollars. Most of these products are perishable in nature. This thesis deals with the development of multi period ordering policies for the perishable products with fixed shelf lives and finite replenishment lead times. In this thesis, simple ordering policies are developed by modifying the traditional EOQ model and base stock policies. The performance of both, the continuous review and periodic review policies, when applied to the perishable products with a fixed shelf life, is evaluated. Two categories of products--one with short shelf lives and another with long shelf lives are considered. Within each category, the shelf life, lead time, order quantity and review periods are varied. For a given shelf life and lead time, the best review periods and order quantities are identified. Both the continuous review and periodic review policies are evaluated using simulation models under three different distributions of demand, using cost and service levels as performance metrics. From the results of the simulations, the impact of product perishability on the EOQ ordering policies is studied. In the periodic review policy, it was found that the traditional EOQ base stock policy is optimal for the perishable products in almost all cases. For the continuous review policy, while perishability was not a factor, an increment of the computed EOQ value was found to be optimal due to lead time consideration. In general, with the proper choice of review periods and order quantities, the EOQ policies that are optimal for the non perishable products can also be used for the perishable products. Comparisons are also done between the relative performances of the periodic and continuous review policies. Overall, the continuous review policy gave a lower cost of operation for similar customer responsiveness measures.