Near Myopic Heuristics for the Fixed-Life Perishability Problem
Purushottaman Nandakumar, Thomas E. Morton
Management Science · 1993 · Volume 39 · Issue 12
Abstract
This paper details the application of a class of heuristics to the Fixed-life Perishability Problem formulated by Nahmias (1975a) and Fries (1975). Various assumptions for this model include i.i.d. demand, linear ordering, holding and penalty costs. Goods have a known fixed lifetime and perished goods cause a linear outdating cost to be incurred. The approach we use, that of developing heuristics from ‘near myopic’ bounds, involves viewing periodic inventory problems in the framework of the classic “newsboy” model. We exploit various properties of the problem under consideration to derive tight bounds on the newsboy parameters, thus leading to efficient bounds on the order quantities. Computational studies reveal that the heuristic policies are near optimal, and are easy to compute.
Keywords
inventory control, infinite horizon dynamic programs, perishable inventory
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