Inventory Depletion Management When the Field Life is Random

Abstract

This paper considers the problem of describing optimal issuing policies when the field life, X ( s ), is a nonnegative random variable. A new optimality criterion involving stochastic ordering is introduced and sufficient conditions given for the optimality of FIFO and LIFO. Two specific models of perishable inventory are then considered; Model I allows for the perishing of items in the stockpile and Model II does not. It is demonstrated that both LIFO and FIFO are optimal for Model I when the items age at the same rate in the stockpile as in the field. Under the assumption that X ( s ) is uniformly distributed the optimality of FIFO is established for Model II.