Deteriorating Inventory Model for Chilled Food

Abstract

With many aspects that affect inventory policy, product perishability is a critical aspect of inventory policy. Most goods will deteriorate during storage and their original value will decline or be lost. Therefore, deterioration should be taken into account in inventory practice. Chilled food products are very common consumer goods that are, in fact, perishable. If the chilled food quality declines over time customers are less likely to buy it. The value the chilled food retains is, however, closely dependent on its quality. From the vendor’s point of view, quantifying quality and remaining value should be a critical business issue. In consequence, we combined the traditional deterioration model and quality prediction model to develop a new deteriorating inventory model for chilled food products. This new model quantifies food quality and remaining value. The model we propose uses real deterioration rate data, and we regard deterioration rate as temperature-dependent. We provide a numerical example to illustrate the solution. Our model demonstrates that high storage temperatures reduce profits and force shorter order cycles.

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