A Two-Product Perishable/Nonperishable Inventory Problem

We consider a situation in which two types of inventories are available to satisfy demands, one having finite lifetime and one an infinite lifetime. It is assumed that demands form a sequence of independent random variables which first deplete from the perishable inventory and then the non-perishable. We show that there are exactly three ordering regions in each period which correspond to the three alternatives: ordering in both periods, ordering only perishable inventory or not ordering. The region boundaries and the optimal policies are characterized for both the single period and dynamic problems. A unique property of the model is that even with inclusion of salvage values at the end of the horizon, the region boundaries remain nonstationary.