A heuristic to manage perishable inventory with batch ordering, positive lead-times, and time-varying demand

So far the literature on inventory control for perishable products has mainly focused on (near-) optimal replenishment policies for a stylized environment, assuming no lead-time, no lot-sizing, stationary demand, a first in first out withdrawal policy and/or product life time equal to two periods. This literature has given fundamental insight in the behavior and the complexity of inventory systems for perishable products. In practice, many grocery retailers have recently automated the inventory replenishment for non-perishable products. They recognize they may need a different replenishment logic for perishable products, which takes into account e.g. the age of the inventory in the system. Due to new information technologies like RFID, it now also becomes more economically feasible to register this type of information. This paper suggests a replenishment policy for perishable products which takes into account the age of inventories and which requires only very simple calculations. It will be shown that in an environment, which contains important features of the real-life retail environment, this new policy leads to substantial cost reductions compared with a base policy that does not take into account the age of inventories.