Title:
Information Sharing to Improve Retail Product Freshness of Perishables (ed.1)
Information Sharing to Improve Retail Product Freshness of Perishables (ed.1)
Author(s)
Ferguson, Mark E.
Ketzenberg, Michael E.
Ketzenberg, Michael E.
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Abstract
We explore the value of information (VOI) in the context of a retailer that provides a
perishable product to consumers and receives replenishment from a single supplier. We assume a
periodic review model with stochastic demand, lost sales, and order quantity restrictions. The
product lifetime is fixed and deterministic once received by the retailer, although the age of
replenishment provided by the supplier varies stochastically over time.
Since the product is perishable, any unsold inventory remaining after the lifetime elapses
must be discarded (outdated). Without the supplier explicitly informing the retailer of the
product age, the age remains unknown until receipt. With information sharing, the retailer is
informed of the product age prior to placing an order and hence can utilize this information in its decision-making. We formulate the respective scenarios as Markov Decision Processes (MDPs)
and measure the VOI as the marginal improvement in cost that the retailer achieves with
information sharing, relative to the case when no information is shared. We establish the
importance of information sharing and identify the conditions under which relatively substantial
benefits can be realized.
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Date Issued
2004-09-14
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274688 bytes
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Text
Resource Subtype
Working Paper