Formulation of Product Replacement Policies for Perishable Inventory Systems using Queuing Theoretic Approach

Inventory management plays a crucial role in managing production processes as well as the supply chains. The study of inventory systems with perishable products has a special significance as it influences the cost and revenue of a firm. Product replacement policies act like safeguards to the retailers (firms) dealing with the business of perishable products. The quantitative analysis of product replacement policies facilitates the decision making in the management of perishable inventory systems. In this paper, the cost-profit analysis of a single server, finite capacity Markovian queueing model with reneging and retention of reneged customers has been performed to study quantitatively the effect of product replacement policies (provided on perished products) on the cost and profit of the retailer. Some important measures of performance are also obtained for the detailed analysis of the model. Through this study, it has been observed that as the percentage of product replacement on perished products increases, the total expected cost of the retailer decreases and total expected profit increases.