Perishable Inventory Systems
A perishable item is one that has constant utility up until an expiration date (which may be known or uncertain), at which point the utility drops to zero. This includes many types of packaged foods such as milk, cheese, processed meats, and canned goods.
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Volume 160
Series Editor: Frederick S. Hillier Stanford University, CA, USA Special Editorial Consultant: Camille C. Price Stephen F. Austin State University, TX, USA
For further volumes: http://www.springer.com/series/6161
Steven Nahmias
Perishable Inventory Systems
Steven Nahmias Santa Clara University OMIS Department Santa Clara, California USA [email protected]
ISSN 0884-8289 ISBN 978-1-4419-7998-8 e-ISBN 978-1-4419-7999-5 DOI 10.1007/978-1-4419-7999-5 Springer New York Dordrecht Heidelberg London Library of Congress Control Number: 2011928073 # Springer Science+Business Media, LLC 2011 All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher (Springer Science+Business Media, LLC, 233 Spring Street, New York, NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights. Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)
For Bill Pierskalla, who opened the door
Preface
Inventory control has emerged as a leading application of operations research. The Survey of Current Business reported that the dollar value of inventories in the USA alone exceeded $1.3 trillion at the end of 2010. Cost-effective control of inventories can cut costs significantly, and contribute to the efficient flow of goods and services in the economy. Many techniques can be brought to bear on the inventory management problem. Linear and nonlinear programing, queueing, and network flow models, are some examples. However, most inventory control packages are based on the methodology of inventory theory. Inventory theory is an important subfield of operations research that addresses the specific questions: when should an order be placed, and for how much? Inventory theory had its roots in the well-known EOQ formula, first discovered by Ford Harris nearly 100 years ago (Harris 1915). Harris, working as a young engineer at the Westinghouse Corporation in Pittsburgh, was able to see that a simple formula for an optimal production batch size could be obtained by properly balancing holding and set-up costs. The EOQ formula, first derived by Harris, is amazingly robust – it still serves as an effective approximation for much more complex models. After Harris’s work, the development of inventory theory was largely stalled until after World War II. The success of operations research in supporting the war effort was the spur needed to get the field off the ground. It seems that the newsvendor model of inventory choice under uncertainty was developed around this time,
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