Performance Analysis of Two Echelon Perishable Inventory System with Joint Ordering Policy

Abstract

Perishable inventory system has received increasing attentions in the past years. An optimal ordering policy for deteriorating inventory system has become more and more important. This paper develops a model to determine the optimal order quantity that minimizes the total expected cost for perishable items. In addition, the solution methodologies as well as an analysis of results are presented. In this study, we create a scenario where two types of products are considered with two locations (Distributor and Retailer) in such a way that there exists a joint ordering policy. A continuous review perishable inventory model with independent Poisson demand for items at retailer and a direct Poisson demand at distributor is assumed. The items are supplied to the retailers from the distribution center (DC) administrated with exponential lead time. The joint probability disruption of the inventory levels of two products at retailer and the supplier are obtained in the steady state case. Various system performance measures are derived and the long run total expected inventory cost rate is calculated. Several instances of numerical examples, which provide insight into the behavior of the system, are presented.