Inventory Control of Perishables based on Shelf Space and Effects of Face Changes of Products with Total Minimum Commitment

Increasing sales profits and inventory control leads to productivity in the retailing industry. To minimize inventory costs and reach an optimal order quantity, it is essential to develop a mathematical model for inventory control that is suited to industries. It is a common practice in the retailing industry to consider the shelf space for storing perishable products without taking the warehouse space into account. This study intends to address the issue and touch upon selling high-profit products and signing total minimum commitment contracts with suppliers in order to optimize total costs in the order time.

Reviewing the literature comprehensively, the authors could identify the effective parameters of the model through desk research. On the basis of the defects found, a model was proposed for inventory control considering the new limitations. The particle swarm optimization algorithm was used in MATLAB in order to reach an optimal response in the problem-solving process and a time series analysis was performed by Minitab for demand forecasting.

The proposed model can have applied implications for the industry. The results from the numerical analyses of the model revealed that an effective change in product face and a total minimum commitment contract with suppliers reduce the costs during the planning period. However, using both of them doesn’t always deliver favorable results. When a total minimum commitment contract is signed with the supplier and a change is made in the product face, it is necessary to reconsider the extent of commitment.

This study addressed the utility obtained from the effects of product face changes on the number of demands and number of orders together with total minimum commitment. The quantity of orders was considered according to the shelf space limitations in order to lower the costs. Results showed that the methods adopted to boost sales and lower costs can be profitable for retailers.