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.
[1] S. Nahmias, S. "Perishable Inventory Theory: A review", Operations
Research, vol.30, 680-708, 1982.
[2] F. Raafat, "Survey of literature on continuously deteriorating inventory
models," Journal of the Operational Research Society, vol. 42(1), 27-37,
1991.
[3] 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.
[4] H. B. Wolfe, "A model for control of style merchandise," Industrial
Management Review, vol.9 (2), 69-82, 1968.
[5] R.I. Levin, and C.A. McLaughlin, Productions/Operations
Management: Contemporary Policy for Managing Operating Systems,
McGraw-Hill, New York, 1972.
[6] E. Silver and R. Peterson, Decision Systems for Inventory Management
and Production Planning, Wiley, New York, 1985.
[7] R. Gupta, and P. Vrat, "Inventory models for stock dependent
consumption rate," Opsearch, vol. 23(1), 19-24, 1986.
[8] 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.
[9] 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.
[10] 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.
[11] 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.
[12] 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.
[13] 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.
[14] S. Smith and D. Achabal, "Clearance Pricing and Inventory Policies for
Retail Chains," Management Science, vol. 44(3), 285-300, 1998.
[15] 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.
[16] P. Dutta, A. Kambli, and A. Grover, "Cost and life-cycle analysis of
perishable products," Master-s Thesis submitted to IIT Bombay, 2010.
[17] 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.
[18] 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.
[19] 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.
[20] S. Han, Y. Oh, and H. Hwang, "Retailing policy for perishable item sold
from two bins," APIEMS, pp.2623-2629, 2009.
[21] 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.
[1] S. Nahmias, S. "Perishable Inventory Theory: A review", Operations
Research, vol.30, 680-708, 1982.
[2] F. Raafat, "Survey of literature on continuously deteriorating inventory
models," Journal of the Operational Research Society, vol. 42(1), 27-37,
1991.
[3] 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.
[4] H. B. Wolfe, "A model for control of style merchandise," Industrial
Management Review, vol.9 (2), 69-82, 1968.
[5] R.I. Levin, and C.A. McLaughlin, Productions/Operations
Management: Contemporary Policy for Managing Operating Systems,
McGraw-Hill, New York, 1972.
[6] E. Silver and R. Peterson, Decision Systems for Inventory Management
and Production Planning, Wiley, New York, 1985.
[7] R. Gupta, and P. Vrat, "Inventory models for stock dependent
consumption rate," Opsearch, vol. 23(1), 19-24, 1986.
[8] 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.
[9] 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.
[10] 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.
[11] 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.
[12] 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.
[13] 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.
[14] S. Smith and D. Achabal, "Clearance Pricing and Inventory Policies for
Retail Chains," Management Science, vol. 44(3), 285-300, 1998.
[15] 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.
[16] P. Dutta, A. Kambli, and A. Grover, "Cost and life-cycle analysis of
perishable products," Master-s Thesis submitted to IIT Bombay, 2010.
[17] 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.
[18] 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.
[19] 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.
[20] S. Han, Y. Oh, and H. Hwang, "Retailing policy for perishable item sold
from two bins," APIEMS, pp.2623-2629, 2009.
[21] 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.
@article{"International Journal of Mechanical, Industrial and Aerospace Sciences:51875", author = "Madhukar Nagare and Pankaj Dutta and Amey Kambli", title = "Retail Inventory Management for Perishable Products with Two Bins Strategy", abstract = "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.
", keywords = "Retail Inventory, Perishable Products, Two Bin,
Profitable Sales.", volume = "7", number = "4", pages = "552-6", }
