Forecast horizon of multi-item dynamic lot size model with perishable inventory.

Abstract

This paper studies a multi-item dynamic lot size problem for perishable products where stock deterioration rates and inventory costs are age-dependent. We explore structural properties in an optimal solution under two cost structures and develop a dynamic programming algorithm to solve the problem in polynomial time when the number of products is fixed. We establish forecast horizon results that can help the operation manager to decide the precise forecast horizon in a rolling decision-making process. Finally, based on a detailed test bed of instance, we obtain useful managerial insights on the impact of deterioration rate and lifetime of products on the length of forecast horizon.