Optimal Myopic Allocation of a Product with Fixed Lifetime

Abstract

Allocation policies of a perishable product from a regional centre to n locations in the region are analysed. Optimal myopic rules are derived for two general classes of policies: rotation policies, where unused product that is not outdated is returned to the centre; and retention policies, where returns to the centre are not possible. Costs are charged for every unit short or outdated. It is shown that the optimal myopic rule minimizes both shortage and outdate costs for one period, it is simple to implement in a realistic environment and is independent of the unit costs. Analytic solutions are given for several demand distributions. Finally, an example of application in blood management is presented.