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Value of supplier flexibility and initial shelf life information for perishable items in an EOQ environment

Ünsal, Saime Ceren
Managing items with shelf life is a challenging task in inventory planning. In this study, we consider an infinite horizon, continuous review inventory model with deterministic stationary demand where the shelf life of the items is uncertain. The initial shelf life of the incoming items from the supplier is a discrete random variable. When the age of the items reaches the initial shelf life, a quality control test for which the outcome is random is applied. According to the result of this test, it is possible to use the items to satisfy demand for an additional time period. Moreover, we also study the supplier flexibilities which are modeled by including a return opportunity at the arrival of the items and the initial shelf life information received before the ordering decision. The aim is to minimize the total expected cost per unit time by using Renewal Theory in order to investigate value of extension test opportunity, value of return opportunity and value of shelf life information. Therefore, several settings are constructed and they are compared by conducting a numerical study.