Modeling the influence of multiple expiration dates on revenue generation in the supply chain

Abstract

Purpose -Inventory control models for perishable products have primarily used a FIFO issuing policy with the objective of minimizing the number of outdated units. This paper aims to develop a model to evaluate an issuing policy for a single product with a fixed shelf life in single echelon inventory system. The issuing policy considers the remaining shelf life of the in-stock inventory and the expected time that the product will spend in inventory as the decision driver. Design/methodology/approach -The model developed has an objective of maximizing expected revenue over time with a budget constraint. A heuristic algorithm is proposed to iteratively arrive at the best solution to the formulation. The heuristic is tested by employing a simulation model of the system. Findings -The proposed heuristic is tested against both the FIFO and the random allocation approaches and found to be superior for all the in-stock with remaining shelf life distribution means of above 40 percent. No significant performance differences were found for the three approaches for remaining shelf life distribution.Research limitations/implications -The research is focused on a single product with multiple expiration dates and further research is necessary to determine the best policies for the multi-product multi-expiration date environment where the items are substitutable.. Practical implications -Retailers stock items with multiple expiration dates. The customer, for obvious reasons, is more likely to choose the item with the longer remaining shelf life. Therefore, the supply to the retailer's shelves and issuing policies for making available the particular items to the customers affect product outdating and related costs. Revenues will be affected by the extent to which more can be charged for items with a longer remaining shelf life or by the impact of the remaining shelf life on demand. This paper provides for a practical approach to that end. Originality/value -The proposed issuing policy has not been tested before and thus makes a contribution to the body of knowledge. The flexibility of using different values for acquisition costs, selling prices, salvage value and penalty functions is a particular strength of the proposed model. Moreover, its potential application to inventory control problems for a wide range of perishable products is substantial.

Promoting brands of perishable items on the promise of generous availability of consumption time

“…The label information and expiry dates must also be easy to read and must position the customer to make efficient purchases. In a recent study, Huq et al 6 found that perishability is an important piece of information to consumers, as it refers to the physical deterioration of a product, implying either a fixed or random product lifetime, after which the product unit has no value to the consumer. A study by the Australian Government Department of Health and Ageing 7 confirms that consumers not only check for expiry dates, but also seek more extensive information from labels (eg directions, product description and composition) to make informed and healthy choices.…”

Ensuring supply chain safety through time temperature integrators

“…Among existing investigations is the work of Huq et al (2005) who develop a model that evaluates a new policy for a single perishable product with a fixed shelf life in a single echelon inventory system. The policy considers the remaining shelf life of products inventory instead of the first in first out (FIFO) approach.…”

“…The second type of studies, although emerging, considers the impact of having information on products' real freshness in order to improve inventory management. Among existing investigations is the work of Huq et al (2005) who develop a model that evaluates a new policy for a single perishable product with a fixed shelf life in a single echelon inventory system. The policy considers the remaining shelf life of products inventory instead of the first in first out (FIFO) approach.…”

Ample Consumption Period Available Until Use-by Dates: A Potential Marketing Position for Store Brands

“…The label information and expiry dates must also be easy to read and must position the customer to make efficient purchases. In a recent study, Huq et al (2005) found that perishability is an important piece of information to consumers as it refers to the physical deterioration of a product, implying either a fixed or random product lifetime, after which the product unit has no value to the consumer. A study by the Australian Government Department of Health and Ageing (2003) confirms that consumers are not only sighting expiry dates, but are indeed seeking more extensive information from labels, (directions, product description and composition) to make informed and healthy choices.…”