A MODEL OF THE PERISHABLE INVENTORY SYSTEM WITH REFERENCE TO CONSUMER-REALIZED PRODUCT EXPIRATION

A new model of the perishable inventory system is presented, which recognizes and incorporates the effects of consumer-realized product expiration. Such expiration has not been explicitly treated within the perishable inventory literature, and occurs when units are expired at the time of sale or expire within some short period of time subsequent to purchase. The model treats the age at which the vendor outdates units as a decision variable, and allows for analysis of the interaction between inventory ordering and outdate policy for a perishable item with random lifetime. As such, the model represents a synthesis of the fixed versus random lifetime perishable inventory literatures. Sensitivity analysis conducted with respect to the new model provides insight into the trade-offs between the costs of carrying, shortage, outdating, and consumer-realized product expiration.