On the effect of lifetime variability on the performance of inventory systems

We consider a periodic review perishable inventory system. Item lifetimes are random and assumed to follow an Erlang distribution. This is a rich modeling allowing us to cover various cases of lifetime variability in practice. The demand process is assumed to be Poisson and the order lead time is constant. For the extreme cases of exponential and deterministic lifetimes, we provide an analytical approach for the system performance evaluation. We also conduct a simulation study to examine the important effect of lifetime variability mixed with the cost parameters on the total operating cost. It appeared that there might be opportunities to considerably improve the operating cost in the case of high lifetime variability. This is more apparent for cases with large outdate, lost sale, and purchasing cost parameters.

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