Grocery omnichannel perishable inventories: performance measures and influencing factors

Purpose- Perishable inventory management for the grocery sector has become more challenging with extended omnichannel activities and emerging consumer expectations. This paper aims to identify and formalize key performance measures of omnichannel perishable inventory management (OCPI) and explore the influence of operational and market-related factors on these measures. Design/methodology/approach- The inductive approach of this research synthesizes three performance measures (product waste, lost sales and freshness) and four influencing factors (channel effect, demand variability, product perishability and shelf life visibility) for OCPI, through industry investigation, expert interviews and a systematic literature review. Treating OCPI as a complex adaptive system and considering its transaction costs, this paper formalizes the OCPI performance measures and their influencing factors in two statements and four propositions, which are then tested through numerical analysis with simulation. Findings- Product waste, lost sales and freshness are identified as distinctive OCPI performance measures, which are influenced by product perishability, shelf life visibility, demand variability and channel effects. The OCPI sensitivity to those influencing factors is diverse, whereas those factors are found to moderate each other's effects. Practical implications- To manage perishables more effectively, with less waste and lost sales for the business and fresher products for the consumer, omnichannel firms need to consider store and online channel requirements and strive to reduce demand variability, extend product shelf life and facilitate item-level shelf life visibility. While flexible logistics capacity and dynamic pricing can mitigate demand variability, the product shelf life extension needs modifications in product design, production, or storage conditions. OCPI executives can also increase the product shelf life visibility through advanced stock monitoring/tracking technologies (e.g. smart tags or more comprehensive barcodes), particularly for the online channel which demands fresher products. Originality/value- This paper provides a novel theoretical view on perishables in omnichannel systems. It specifies the OCPI performance, beyond typical inventory policies for cost minimization, while discussing its sensitivity to operations and market factors

On the issuing policies for perishable items such as red blood cells and platelets in blood service

Red blood cells (RBCs) and platelets are examples of perishable items with a fixed shelf life. Recent studies show that transfusing fresh RBCs may lead to an improvement of patient outcomes. In addition, to better manage their inventory, hospitals prefer to receive fresh RBCs and platelets. Therefore, as well as minimizing outdates and shortages, reducing the average age of issue is a key performance criterion for blood banks. The issuing policy in a perishable inventory system has a substantial impact on the age of issue and outdate and shortage rates. Although several studies have compared the last in first out (LIFO) and the first in first out (FIFO) policies for perishable products, only a few studies have considered the situation of blood banks where replenishment is not controllable. In this study, we examine various issuing policies for a perishable inventory system with uncontrollable replenishment, and outline a modified FIFO policy. Our proposed modified FIFO policy partitions the inventory into two parts such that the first part holds the items with age less than a threshold. It then applies the FIFO policy in each part and the LIFO policy between the parts. We present two approximation techniques to estimate the average age of issue, the average time between successive outdates and the average time between successive shortages of the modified FIFO policy. Our analysis shows in several cases that where the objective function is a single economic function, or it is formulated as a multiobjective model, the modified FIFO policy outperforms the FIFO and LIFO policies

Optimisation and control of the supply of blood bags in hemotherapic centres via Markov Decision Process with discounted arrival rate

Running a cost-effective human blood transfusion supply chain challenges decision makers in blood services world-wide. In this paper, we develop a Markov decision process with the objective of minimising the overall costs of internal and external collections, storing, producing and disposing of blood bags, whilst explicitly considering the probability that a donated blog bag will perish before demanded. The model finds an optimal policy to collect additional bags based on the number of bags in stock rather than using information about the age of the oldest item. Using data from the literature, we validate our model and carry out a case study based on data from a large blood supplier in South America. The study helped achieve an overall increase of 4.5% in blood donations in one year

Platelet inventory management in blood supply chain under demand and supply uncertainty

Supply chain management of blood and its products are of paramount importance in medical treatment due to its perishable nature, uncertain demand, and lack of auxiliary substitutes. For example, the Red Blood Cells (RBC's) have a life span of approximately 40 days, whereas platelets have a shelf life of up to five days after extraction from the human body. According to the World Health Organization, approximately 112 million blood units are collected worldwide annually. However, nearly 20 percent of units are discarded in developed nations due to being expired before the final use. A similar trend is noticed in developing countries as well. On the other hand, blood shortage could lead to elective surgeries cancellations. Therefore, managing blood distribution and developing an efficient blood inventory management is considered a critical issue in the supply chain domain. A standard blood supply chain (BSC) achieves the movement of blood products (red blood cells, white blood cells, and platelets) from initial collection to final patients in several echelons. The first step comprises of donation of blood by donors at the donation or mobile centers. The donation sites transport the blood units to blood centers where several tests for infections are carried out. The blood centers then store either the whole blood units or segregate them into their individual products. Finally, they are distributed to the healthcare facilities when required. In this dissertation, an efficient forecasting model is developed to forecast the supply of blood. We leverage five years' worth of historical blood supply data from the Taiwan Blood Services Foundation (TBSF) to conduct our forecasting study. With the generated supply and demand distributioins from historial supply and demand data as inputs, a single objective stochastic model is developed to determine the number of platelet units to order and the time between orders at the hospitals. To reduce platelet shortage and outdating, a collaborative network between the blood centers and hospitals is proposed; the model is extended to determine the optimal ordering policy for a divergent network consisting of multiple blood centers and hospitals. It has been shown that a collaborative system of blood centers and hospitals is better than a decentralized system in which each hospital is supplied with blood only by its corresponding blood center. Furthermore, a mathematical model is proposed based on multi-criteria decision-making (MCDM) techniques, in which different conflicting objective functions are satisfied to generate an efficient and satisfactory solution for a blood supply chain comprising of two hospitals and one blood center. This study also conducted a sensitivity analysis to examine the impacts of the coefficient of demand and supply variation and the settings of cost parameters on the average total cost and the performance measures (units of shortage, outdated units, inventory holding units, and purchased units) for both the blood center and hospitals. The proposed models can also be applied to determine ordering policies for other supply chain of perishable products, such as perishable food or drug supply chains.Includes bibliographical references

Transshipment in supply chain networks with perishable items

Supply chain management is an efficient approach to managing the flow of information, goods, and services in fulfillment of customer demand. The implementation of supply chain management significantly affects the cost, benefit level, and quality. Over the past decades, multiple strategies for effective supply chain management have been developed in both academia and industry. One such strategy is named lateral transshipment which allows movement of stock between locations at the same echelon level or even across different levels. Although transshipment has been considered in the literature for a long time, there has been limited studies of transshipment for perishable items, most likely because of the complex structure of perishable inventories. The analysis of perishable-inventory systems has been considered in numerous articles because of its potential application in sectors such as chemicals, food, photography, pharmaceuticals, and blood bank management. Blood services in Australia rely on voluntary, non-remunerated donors to satisfy the demand for blood. Blood services confront ongoing challenges in providing an adequate supply of blood and blood products. One of the powerful tools that could improve the efficiency of the blood supply chain is lateral transshipment. This thesis presents three models that have application in the transshipment of perishable items such as blood. The first model (presented in Chapter 2) outlines the development of a new transshipment policy for perishable items, to enhance supply chain performance. A Poissondistributed customer demand is assumed and the effect of reactive transshipment on expected costs are evaluated. A heuristic solution is developed, using partial differential equations to compute performance measures and cost function. The performance of this model is evaluated through a numerical study. The results indicate that this transshipment policy is effective under lost-sale and backordering scenarios. In addition, the performance of the suggested transshipment policy is compared with the current transshipment policy that is practiced in some Australian hospitals. The results suggest that by setting the optimal threshold, a significant cost saving could be obtained with the same average issuing age of the current policy. The second model (presented in Chapter 3) considers a finite-horizon multi-period inventory system with one main hospital connected to several smaller hospitals. The hospitals face random demand and small hospitals are allowed to transship to the big hospital to mitigate their wastage. The problem is formulated as an infinite-horizon dynamic programming model. The objective of this model is to determine an optimal ordering and transshipment policy that minimizes the total expected cost. An approximate dynamic programming (ADP) model is used to approximate the value function with a linear combination of basis functions, using column generation to cope with the course of dimensionality. The numerical results suggest that considerable cost saving can be achieved by using an ADP model. The third model (presented in Chapter 4) proposes a proactive transshipment policy for a network of hospitals with uncertain demand. At the beginning of each review period, each hospital makes decisions on the quantity to order from a central blood bank and to transship to other hospitals. The problem is formulated as a two-stage stochastic programming model where the Quasi-Monte Carlo (QMC) sampling approach is used to generate scenarios and the optimal number of scenarios is determined by conducting stability tests. The performance of the developed model is evaluated through numerical experiences. The numerical results indicate significant potential cost savings in comparison with the current policy in use and the no-transshipment policy

Ensuring blood is available when it is needed most

The provision of blood to patients in need is an imperative faced by all countries.  Red blood cells (RBCs) are perishable with a life of 42 days.  Inventory managers at hospitals need to know how many RBCs to order so that the probability of experiencing shortages or outdates is minimised.  This is complicated by demand for RBCs being doubly stochastic.  Both the number of patients that need RBCs and quantity of RBCs they will need are random.  For centralised blood banks not only are the orders they receive from hospitals apparently random, the supply of blood is also random. This thesis shows that, in addition to the previously mentioned sources of volatility, the structure of the supply chain induces further volatility.  This occurs due to the presence of delivery delays and negative feedback loops in two locations within the supply chain.  It is shown how this volatility can be addressed with some simple structural changes.  But simply removing system induced volatility does not imply that the supply chain is optimised.  To address optimality the problem is formulated as a Markov decision process (MDP).  A solution to this process uses Stochastic Dynamic Programming (SDP), but this results in a combinatoric explosion making the computation of an exact solution within a reasonable time impossible.  Instead, Stochastic Average Approximation (SAA) is used to derive an approximate solution.  Repeated, sequential application of this is an exercise in Discrete Time Stochastic Control.  A working control solution is provided in python.  This solution can be arranged so as to mimic the two echelon supply chain found in blood inventories.  It is general enough to apply to any discrete perishable inventory system with random demand and/or supply. The approach for blood inventories requires credible estimates of demand for RBCs.  It is shown, using hierarchical Bayesian modelling and Discrete Phase-Type (DPH) distributions, that credible estimates of demand at hospitals of any size can be derived from publicly available information.  In particular a new method for obtaining the parameters of a DPH distribution is formulated and applied to estimating transfusion quantities from publicly available sources. An application of the proposed solution is presented for RBC inventories at both hospitals and at the blood bank.  For the blood bank in particular it is shown how this can be used to determine the quantity of donors needed to meet demand within a desired probability of adequacy