An analysis of optimal order decision for substitutable perishable products at different loss rates Online publication date: Tue, 06-Jul-2021
by Jing Wang
International Journal of Applied Decision Sciences (IJADS), Vol. 14, No. 4, 2021
Abstract: Loss rate was here used to characterise products' life cycles given that perishable products produced through different processes have different life cycles. In addition, products with different loss rates may also be interchangeable to the end user. In this paper, we first established two realistic models with the goal of maximising the expected profit. We here proved that the optimal size of each order and maximum expected profit exist and are unique in both models. After the numerical analysis, we concluded that the rate of loss of models with or without substitutes has the same impact as each other on the optimal order size and the maximum expected profit, and the trends in the variation in the cost of each order are also the same. Furthermore, the trends in the variations with substitutes are relatively slow. The model with substitutes was found to facilitate management decisions through the substitution coefficient, and the boundary value was consistent with the value of the model without substitutes.
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