Production planning of a perishable product with non-stationary demand and long lead time

Karin G.J. Pauls-Worm, Rene Haijema, Eligius M.T. Hendrix, Roberto Rossi, Jack G.A.J. van der Vorst

Research output: Contribution to conferenceAbstract

Abstract

We study a production planning problem for a perishable product with a fixed
lifetime, under a service-level constraint. The product has a non-stationary stochastic
demand. Food supply chains of fresh products like cheese and several crop
products, are characterised by long lead times due to maturation processes. Long
lead times in combination with non-stationary demand, tend to induce high safety
stock levels. For perishable products, this can lead to an increase in outdating. To
minimise waste due to outdating, one issues the oldest product first, i.e. a FIFO
issuing policy. In case of out-of-stock, demand is backlogged. The objective of our
study is to develop a production planning method for a perishable product with
non-stationary demand and a long deterministic production lead time, that meets
fluctuating demand and provides low safety stocks and few outdating.

For the case of a fixed lifetime perishable product confronted with non-stationary
demand, zero lead time and a FIFO issuing policy, Pauls-Worm et al. (2012)
formulate an MILP model that determines a stock-age-dependent replenishment
cycle policy. Specifically, an α-service-level constraint is applied. In our study, we
adapt the MILP model adding a lead time and we determine safety stocks based on
the desired fill rate. Based on this adapted model, we develop a heuristic procedure
to determine a production plan for a perishable product with a long lead time. As
the input demand forecasts become more reliable with an approaching selling date,
given the long lead time, it may be advantageous to correct the production plan
for more accurate forecasts. The procedure is based on a rolling planning horizon
in which demand forecasts are updated.
  
The first results are promising: the procedure allows for relatively low safety stocks
and is able to meet the desired fill rate.
Original languageEnglish
Publication statusPublished - Aug 2012
Event17th International Symposium on Inventories - Budapest, Hungary
Duration: 20 Aug 201224 Aug 2012

Conference

Conference17th International Symposium on Inventories
CountryHungary
CityBudapest
Period20/08/1224/08/12

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