Blood platelet inventory management with protection levels

• We introduce a critical-level policy for an age-differentiated perishable product.
• Blood platelets are very valuable and perishable (3-days of shelf life).
• We model our problem as MDP and computationally compare it with other heuristics.
• There are different demand streams for different ages of blood platelets.
• Our heuristic outperforms when supplies are tight and substitution is expensive.

We consider a discrete-time inventory system for a perishable product where demand exists for product of different ages; an example of such a product is blood platelets. In addition to the classical costs for inventory holding, outdating, and shortage, our model includes substitution (mismatch) costs incurred when a demand for a certain-aged item is satisfied by a different-aged item. We propose a simple inventory replenishment and allocation heuristic to minimize the expected total cost over an infinite time horizon. In our heuristic, inventory of the newest items is replenished in fixed quantities and the newest items are protected for future use by limiting some substitutions when making allocation decisions according to a critical-level policy. We model our problem as a Markov Decision Process (MDP), derive the costs of our heuristic policy, and computationally compare this policy to extant “near optimal” policies in the literature. Our extensive computational study shows that our policy leads to superior performance compared to existing heuristics in the literature, particularly when supplies are limited.