A Vendor Managed Inventory with FIFO and LIFO Plans

Authors

  • Yui-yip Lau
  • Arash Mazaheri

Abstract

Nowadays, the stores always want to find a valid plan for perishable products as a challengeable concern for the management of perishable items. As known, regarding the perishable products which have a limitation for consumption, we cannot force the consumers to buy the products which are close to their shelf-life time. To address this challenge, this paper considers a hybrid of FIFO and LIFO strategies and its impact on the profits of the vendor managed inventory contracts which are very little discussion in the literature. Most importantly, this paper deals with an inventory system for perishable products stochastically with a new optimization model. The proposed problem computes the costs of the order and storage with two different holding costs based on the FIFO and LIFO strategies as well as the profits from selling of the products. With a maximizing optimization model, the goal is to find the optimal order for each store in per period. The model is solved by the dynamic programming with backward strategy. The results confirm the applicability and efficiency of the proposed model in this context and the high impact of products’ shelf-life to use the FIFO or LIFO strategies in the stores.

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Published

2021-03-01

Issue

Section

Articles