Joint Discount and Replenishment Parametric Policies for Perishable Products

We consider a joint discount and replenishment problem in a discrete periodic review fashion for the sale of a perishable product, characterized by limited deterministic shelf life, replenishment lead times, and stochastic demand. Customers decide what to buy according to a linear discrete choice model, balancing price and perceived quality, uniquely determined by the residual shelf life. The decisions we consider are: How many new items to order, the age of the items to be discounted, and how much discount to offer. In this context, we compare a set of policies mixing the constant order policy and the base stock one with some easy discounting policies, optimizing their parameters using a simulation-based optimization framework. To evaluate their performance in terms of revenue and quantity of scraped items, we consider four realistic instances for a grocery retailer characterized by products of different shelf life and variance of demand. Experiments show that best results are achieved by a base stock policy that discounts products of different ages based on a threshold: If the quantity of the inventory of a given age is greater than a threshold it applies a discount, otherwise no discount is proposed. In the presented configurations, this policy increases the average reward compared to policies that do not discount. Copyright (C) 2024 The Authors. This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0/)