A replenishment policy for perishable items with cold chain transportation and lead time reduction options

Abstract

Perishability relates to products that have limited shelf life and are prone to spoilage, decay, or becoming unsafe for use over time. Although perishability is a common aspect in several product categories such as fresh produce, pharmaceuticals, blood product and fashion industry, many inventory models assume that products have an infinite shelf life. In this work, we introduce a novel approach that integrates inventory replenishment and cold chain technology decisions to replenishment policy of inventories with the aim of better preserving the effective shelf life of products. We focus on a single product, single location, continuous review inventory model with positive lead time, where products have fixed lifetimes. Demand arrivals are assumed to follow a Poisson process. If there are two batches in stock, items in the old batch is disposed with a salvage value. We assume that a cold chain technology is available to maintain the items in a preservative environment, protecting them against temperature and moisture during lead time, thereby providing an extended shelf life when the items arrive in the inventory. In particular, we adopt a modified lot size/reorder point (Q,r) policy that allows for a cold chain technology. The model also allows for a scenario where lead time is reduced through expedited transportation, which directly increases shelf life of arriving batch while decreases the time spent during transportation. The objective is to minimize the expected cost per unit time over an infinite horizon the decision variables of order quantity, reorder level, and cold chain technology level. A numerical study is provided to demonstrate the model performance, its sensitivity to system parameters and to compare all the policies we present.