Shelf Life Extending Packaging, Inventory Control and Grocery Retailing

Qing Li, P. Yu, X. Wu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

9 Citations (Scopus)

Abstract

© 2017 Production and Operations Management Society Retailers of perishable goods are often faced with the choice between more expensive packaging that can extend shelf life of their products and less expensive packaging that cannot. Different choices will lead to different sales, costs, and waste, and different choices require different inventory control policies. In this paper, we study the coordination of inventory and packaging decisions in a retailing environment. Items in an active package have a longer lifetime than those in a regular package and cost more. Customers always pick items with a longer lifetime first. When items with a longer lifetime are out of stock, a portion of customers are willing to buy less fresh items as substitutes. Our study shows the optimality of a "separation" policy when the substitution rate is high. In the separation policy, as the initial inventory level increases, the optimal policy changes from using active packaging only, then to using regular packaging only, and finally to ordering nothing. These results are very specific to the way perishable inventories are depleted in retailing. Our numerical study shows that although it may not be optimal in terms of cost, the adoption of active packaging can consistently achieve substantial waste reduction.
Original languageEnglish
Pages (from-to)1369-1382
Number of pages14
JournalProduction and Operations Management
Volume26
Issue number7
DOIs
Publication statusPublished - 1 Jul 2017
Externally publishedYes

Keywords

  • dynamic programming
  • LIFO
  • packaging
  • perishable inventory management
  • waste

ASJC Scopus subject areas

  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Management of Technology and Innovation

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