Production policy optimization in the systems with perishable products under seasonal demand

Manufacturing systems are often subject to dynamic market conditions, characterized by demand variations over time. Production policy optimization in this situation is more challenging than in case of stationary demand rate. When manufactured products are perishable, the demand variations are of particular importance, as they often result in additional losses due to disposal of perished products. In particular, that is the case in food and pharmaceutical industry. Both these aspect must be taken into account for production policy optimization. It is particularly important when the production facility is failure-prone. The rationale here is that conventional approach is based on setting the safety (hedging) inventory level in order to cope with potential equipment failures leading to shortage. For perishable products, however, this approach needs revision due to eventual deterioration of products kept in stock longer than the shelf-life limit. To address the production control problem in this context, a 3-steps procedure is developed. First, the hedging inventory level that varies in time adapting to demand variations is computed. Second, the upper limit for the products kept in stock (perishable inventory limit), which depends on the shelf-life and demand variation pattern (thus also varies in time) is determined. Third, that perishable inventory limit is shown to determine an upper bound for the hedging level. The proposed production policy adapts to demand variations and accounts product shelf-live; it is optimal and results in no perished products.