An optimal EOQ model for perishable products with varying demand pattern

The demand pattern for most perishable products varies during their life cycle in the market. These variations must be properly reflected in inventory management in order to prevent unnecessary stock-out or excess inventory with associated increase in cost. In this paper, a multi-period economic order quantity (EOQ) model for managing the inventory of perishable items having varying demand pattern is presented. The model was formulated using a general ramp-type demand function that allows three-phase variation in demand pattern. These phases represent the growth, the steady and the decline phases commonly experienced by the demand for most products during their life cycle in the market. The model generates replenishment policies that guarantees optimal inventory cost for all the phases. Numerical experiments and sensitivity analysis were carried out to demonstrate the suitability of the model for a wide range of seasonal products. Result of the experiments revealed that the points at which demand pattern changes are critical points in managing inventory of products with ramp type demand.