An approximate periodic model for fixed-life perishable products in a two-echelon inventory-distribution system

Product perishability is a major concern of certain industrial sectors, especially the agro-food industry. This paper investigates the effect of product perishability and retailers' stockout policy on system total cost, net profit, service level, and average inventory level in a two-echelon inventory-distribution system, and develops an approximate inventory model to these system performance measures. A simulation experiment shows that by incorporating a fixed lifetime and a retailer lost sale policy to an existing model, in most situations, perishability results in negative effects on all performance measures. However, with simple modifications to an existing model to incorporate fixed lifetime perishability and retailers' lost sales policy, a significant improvement in the system total cost and system net profit can be achieved. (c) 2004 Elsevier B.V. All rights reserved.