Optimal ordering policy for fast deteriorating items

Facing the demand of periodic pattern and expiration date, how to make an optimal ordering policy by the retailer of fast deteriorating items is the key problem nowadays. In this study, we propose a model for fast deteriorating items with periodic pattern demand and expiration date. An algorithm is presented to derive an optimal replenishment cycle, shortage period and order quantity such that the unit time profit is maximized. The coordination policy between the retailer and the supplier improves the efficiency of the ordering policy especially when the deterioration rate is high. Numerical examples and sensitivity analysis are provided to illustrate the theory