Computers & Industrial Engineering 118 (2018) 9–22

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Computers & Industrial Engineering

journal homepage: www.elsevier.com/locate/caie

Development and simulation analysis of a new perishable inventory model T

with a closing days constraint under non-stationary stochastic demand
⁎
Larissa Janssena, , Jürgen Sauerb, Thorsten Clausc, Uwe Nehlsa
a
Jade University of Applied Sciences, Friedrich-Paffrath-Str. 101, 26389 Wilhelmshaven, Germany
b
Carl of Ossietzky University Oldenburg, Uhlhornsweg 84, 26111 Oldenburg, Germany
c
Technical University Dresden, IHI Zittau, Markt 23, 02763 Zittau, Germany

A R T I C L E I N F O A B S T R A C T

Keywords: The food waste in grocery retail is a worldwide problem. Many mathematical inventory models for perishable
Inventory model items do not have a closing days constraint, although the age of perishable items also increases on closing days in
Perishable items grocery stores. We develop a new age-based inventory model with a closing days constraint. This stochastic
Closing days multi-item inventory model includes total stock capacity constraints, a positive lead time, a periodic inventory
Stochastic demand
control, a target customer service level and mixed FIFO and LIFO issuing policies for perishable items with a
Fixed lifetime
fixed lifetime under a non-stationary random demand. We show in a comparative simulation study under a
Simulation study
rolling planning that the closing days constraint improves order decisions and reduces waste quantities and costs
in grocery stores.

1. Introduction
In many countries, food losses occur in grocery retail. Grocery waste
is primarily made up of quickly perishable goods with a lifetime be-
tween 3 and 5 days such as fresh fruits, vegetables, salads, meat, fish,
dairy products and baked goods (Kranert et al., 2012). According to the
study of Kranert et al. (2012), the food waste in grocery retail is often
related to the inventory management for quickly perishable goods. In-
ventory management is an important task in grocery retail and addresses
the questions (Nahmias, 2011): when should an order be placed and
how much should be ordered? Cost-effective control of inventories can
cut costs significantly. Demand uncertainty is characteristic in grocery
retail, however, it makes the inventory management difficult and in-
fluences the food waste.
Worldwide, many grocery stores operate with weekly closing days.
Many mathematical inventory models for perishable items ignore the
existence of closing days, although the age of perishable goods in-
creases daily. Example 1 illustrates differences in inventory models with
and without a closing days constraint.
Example 1. Table 1 shows two inventory models. While the aging of
goods on the Sunday is considered in the first inventory model (Model
1), the second inventory model (Model 2) ignores the Sunday. On
Sundays, the grocery store is closed. Hence, demand dt on Sundays is
always zero (dt = 0 ). On the Friday, the goods are one day old (h = 0 ).
The maximum fixed lifetime H of goods is 3 days (H = 2 ). Perishable
goods do not age on Sundays in model 2, because Sundays do not exist
in it. This is why model 2 will have a stock level of 6 quantity units (QU)
(Ith = 6 QU) at the end of Mondays and model 1 will have no initial
stock on Mondays (Ith = 0 QU). Ith = 0 QU because the goods will be
spoiled (the age of goods is h = 3 (4 days) and this is higher than the
maximum lifetime of 3 days).
The primary goal of our work is to study the influence of the closing
days constraint in mathematical inventory models for perishable goods.
In view of the waste problem in grocery retail, the question arises
whether the closing days constraint in perishable inventory models
improves the inventory management. Our investigations focus on the
influence of the closing days constraint on waste quantity and total
costs.
For this research paper, we chose the following methodological ap-
proach: In the first step, we develop a new inventory model with closing
days constraint for perishable items (an extreme case inventory model).
In the second step, we perform a comparative simulation study under a
rolling planning to measure the effect of the closing days constraint.
The developed stochastic model is a periodic age-based inventory
model for multiple perishable goods with a fixed lifetime. A mixture of
LIFO and FIFO policies are appropriate in the real grocery retail (Han,
Oh, & Hwang, 2011). Hence, the model implements mixed FIFO and
LIFO issuing policies. In the FIFO issuing policy the oldest goods and in
the LIFO issuing policy the freshest goods are withdrawn first (Nahmias,
2011). Moreover, the inventory model has the following relevant

⁎
Corresponding author at: Carl of Ossietzky University Oldenburg, Germany
E-mail addresses: larissa.janssen@jade-hs.de (L. Janssen), juergen.sauer@uni-oldenburg.de (J. Sauer), Thorsten.Claus@tu-dresden.de (T. Claus), uwe.nehls@jade-hs.de (U. Nehls).

https://doi.org/10.1016/j.cie.2018.02.016
Received 9 November 2016; Received in revised form 9 February 2018; Accepted 11 February 2018
Available online 13 February 2018
0360-8352/ © 2018 Elsevier Ltd. All rights reserved.
L. Janssen et al.
Table 1
Example 1 shows two inventory models with (Model 1) and without (Model 2) a closed
day. The stock level Ith is clearly different on Mondays.
Model 1 (With closing days) Model 2 (No closing days)
Demand Stock Age of items Demand Stock
dt Ith h dt Ith
Friday 2 10 QU h=0 2 10 QU
Saturday 2 8 QU h=1 2 8 QU
Sunday 0 8 QU h=2 Sunday is ignored
Monday 2 0 QU because (h = 3) > H 2 6 QU
features for practice: a target customer service level, a positive de-
terministic lead time, a given order cycle, considered imperfect items
and closing days under a non-stationary stochastic demand.
The comparative simulation study uses a prototype of one super-
market chain with several grocery stores. Grocery stores in this proto-
type order quickly perishable goods with the help of the developed
mathematical model which either includes or excludes the weekly
closing days of stores. We evaluate the influence of the closing days
constraint on the basis of simulation results.
Moreover, research on the waste problem for stores open 6 versus
7 days weekly is seldom found. Since the research is related to the main
topic of this work (influence of the closing days constraint in mathe-
matical inventory models), we additionally present simulation results
for this topic.
Further sections are organized as follows: Section 2 lists related
works and describes the relevance of this work. Section 3 establishes
the developed inventory model with a closing days constraint. The
solution algorithm is described in Section 4. Section 5 includes our si-
mulation study. Section 6 presents the simulation results with scenarios
and a sensitivity analysis. In Section 7 we discuss our key findings.
Section 8 sums up the results of our investigations.
2. Related work
2.1. Literature review
Perishable inventory models are classified by the lifetime (fixed or
random) of items and the demand type (stochastic or deterministic)
(Bakker, Riezebos, & Teunter, 2012; Goyal & Giri, 2001; Janssen, Claus,
& Sauer, 2016) and are additionally classified by an inventory control
(periodic or continuous) (Karaesmen, Scheller-Wolf, & Deniz, 2011;
Nahmias, 1982). In grocery stores, the maximum lifetime of many
perishable goods (milk, fish, yoghurt etc.) is known a priori (fixed
lifetime). The classic periodic inventory policy (order-up-to policy) (r ,S ) has
a fixed order cycle R and a dynamic order quantity q (Tempelmeier,
2011). The application of this policy for perishable goods needs to
consider the lifetime of the goods (Nahmias, 2011). The first periodic
inventory model for perishable items with a fixed lifetime higher than
two periods is presented in Nahmias (1975) and Fries (1975). In age-
based inventory systems, the stock is classified by the age of items. These
models have the advantage that the stock level represents a real-life
image, if the stock issuing policy is formulated in the model in ac-
cordance with realistic inventory depletion. The disadvantage of age-
based inventory models is that a longer lifetime of products (but not a
negligible lifetime) leads to a higher computation time for finding an
optimal order quantity. Several papers present age-based inventory
systems (Broekmeulen & van Donselaar, 2009; Duan & Liao, 2013;
Ferguson & Ketzenberg, 2006; Haijema, 2014; Minner & Transchel,
2010; Nahmias, 1977; Olsson, 2014; Tekin, Gürler, & Berk, 2001).
Janssen et al. (2016) sort the papers of the last years according to
key topics of inventory models and offer a key topic literature review.
The demand estimation for fast moving goods in retail is described in
Kitaeva, Stepanova, Zhukovskaya, and Jakubowska (2016). Diabat,
Computers & Industrial Engineering 118 (2018) 9–22
Abdallah, and Le (2016) and Le, Diabat, Richard, and Yih (2013) pre-
sent the inventory and routing problem for perishable goods over a
given time horizon so that the total transportation cost is minimized.
There are many other publications which investigate inventory systems
in the field of retail and warehouse location (Chen & Teng, 2014;
Age Diabat, Battaïa, & Nazzal, 2015; Diabat & Deskoores, 2016; Diabat,
h Dehghani, & Jabbarzadeh, 2017; Diabat, Richard, & Codrington, 2013;
h=0
Diabat & Richard, 2015; Hiassat, Diabat, & Rahwan, 2017;
h=1 Hosseinipour & Sandoh, 2013; Diabat & Theodorou, 2015; Diabat,
2016), for example.
h=2
2.2. Relevance of this work
Our work contributes to a better understanding of inventory models
for quickly perishable items with a fixed lifetime for companies oper-
ating with weekly closing days. Despite our intensive search, we did not
find inventory models for perishable items with an explicit closing days
constraint. Until now, it is not known how important the closing days
constraint is in mathematical inventory models for quickly perishable
items in view of the waste problem in the food supply chain. Hence, our
significant contribution in this research field is the definition of a
mathematical inventory model with a closing days constraint and an ana-
lysis of this constraint in a simulation study with a realistic application.
Furthermore, we show in this paper the calculation of a safety stock for a
risk period including closing days (for non-stationary demand and taking
into account imperfect items). A risk period typically includes only
periods from the order cycle R and a replenishment lead time L
(Tempelmeier, 2011), but no closing days which may lie in between.
Some works deal with similar problems. For example, De (2013)
develops a concept including the opening time duration in a day in a
classical EOQ model. The author splits a day into two parts, one being
the opening time period and the other one the closing time period (for
instance, a closing time period is 8:00 PM to 8:00 AM in a day). The
EOQ model does not consider full closing days. In our inventory model,
there are open and full closing days. This assumption differs strongly
between their and our model. Hosseinipour and Sandoh (2013) study
the classic newsvendor problem and discuss an optimal number of
business hours per day as well as an optimal stocking quantity. In
comparison, we assume already existing opening times and concentrate
on the analysis of closing days and not on the optimization of the
opening times of stores.
Weteling (2013) reviews the main effects of open days in grocery
stores (Monday-Saturday and Monday-Sunday) on the outdating of
perishable items. Haijema (2014) investigates the effect of the possi-
bility of ordering perishable items on Saturdays and/or Sundays and
receiving the delivery on the same day. The focus of the author’s ana-
lysis is the added value (archived cost reductions) of a disposal policy.
We expand upon both studies with other relevant results. For example,
we investigate (additional) demand patterns: systematic, seasonal and
weekday trend demand. And unlike the aforementioned works, we use
mixed FIFO and LIFO issuing policies because this is practice-relevant in
grocery retail.
What makes our model different from existing perishable inventory
models which assume a zero demand on closing days? Our inventory
model is different in these three points:
1. In a large number of perishable inventory models, a positive de-
terministic lead time L is assumed. But if the store has closing days,
then these models cannot take into account that this is linked with
lead time. For example, the lead time is L = 1 (one day) and the
store is closed on Sundays. On Saturday, the lead time should be
2 days (L = 2), because the delivery will take place on Monday and
not on Sunday (the store is closed on Sundays). Most models assume
only L = 1 and ignore L = 2 on Saturdays. In contrast, our inventory
model correctly considers deterministic positive lead time if stores have
closing days.
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L. Janssen et al. Computers & Industrial Engineering 118 (2018) 9–22

2. Many others inventory models for perishable goods have a problem T Rolling planning horizon
with the shelf-life H > 2 days if the store has closing days. In that τ A further period after t
case, the remaining stock x may exist after the closing day. For xkh Initial stock for item k of age h in period t1 of a rolling
example, the authors Minner and Transchel (2010) write that the horizon T
determination of the probability distribution of inventory needs to ykt Delivery with item k of age h = 0 in period t . The delivery
be performed simultaneously if shelf-life H ⩾ 3 and lead time L ⩾ 2. is from the previous rolling planning T .
In contrast, our inventory model supports flexible shelf-life and lead time Decision and random variables:
if stores have closing days. We solve this problem with an explicit
constraint for closing days. FIFO
E (Dkth ) Random age-based FIFO demand for item k of age h . It is
3. When analyzing the example from Table 1, we see the contrast in the a part of expected demand component E (DktFIFO ) .
calculation of inventory ages in model 1 and model 2. Model 1 (with
E (Dkth ) Random age-based LIFO demand for item k of age h . It is
LIFO
explicit closing days constraint) is our modelling approach and
a part of expected demand component E (DktLIFO ) .
model 2 is the typical modelling approach (ignores closing days).
Ikth Inventory level at the end of period t for item k of age h
These different modelling approaches lead to discrepancies in in-
init
Ikth Initial inventory level at the beginning of period t for
ventory ages. We calculate the inventory aging more precisely if
item k of age h (free of waste)
stores have closing days.
qkt Order quantity for item k in period t
3. Inventory model with a closing days constraint z kt This binary variable shows in which periods t orders will
be placed for item k
We develop a multi-item inventory model with a finite rolling
horizon, mixed LIFO- and FIFO issuing policies, a positive lead time, a 3.2. Assumptions
given inventory control Rk ⩾ 1 and the consideration of a stochastic
non-stationary demand and a limited stock capacity. The assumptions of the developed stochastic inventory model for
perishable items with fixed lifetime are as follows:
3.1. Notation
1. A period t is always one day.
Indices: 2. The optimization takes place for the rolling horizon T . The rolling
planning can be repeated infinitely. T consists of equally long
Age h periods t .
h ∈ HkS ≔ 0,…,Hk Index of the age of a perishable item k
3. Lead time Lk is deterministic and positive (Lk > 0 ).
Item k k ∈ K S ≔ 1,…,K Index of perishable items
4. The order cycle is Rk ⩾ 1 for each item k .
Period t t ∈ T S ≔ 1,…,T Index of planning periods
5. The maximum lifetime Hk is fixed and known a priori. The age h of
items changes only on a day to day basis. After the expiration of
their lifetime (if h > Hk ), the item k is outdated and it becomes a
akt Inventory holding cost rate per unit for item k in period t waste product.
bkt Purchase unit price (variable order cost per unit) for item 6. The risk period Rk + Lk including closing days CD is not longer than
k in period t Hk (Hk > Rk + Lk + CD ). It is excluded that items outdate before
ckt Fixed order cost for item k in period t they arrive in the store.
CD Number of closing days in a store 7. The freshest item has the age h = 0 . A delivery always has the
E (Dkt ) Expected non-stationary demand E (Dkt ) for item k in freshest items of age h = 0 .
period t 8. The stochastic demand Dkt of product k in period t is non-stationary
E (DktFIFO ) Expected FIFO component of the expected demand E (Dkt ) and normally distributed. Estimation of an expected demand
for item k in period t E (Dkt ) = μkt and variance VAR (Dkt ) are assumed to be provided by
E (DktLIFO ) Expected LIFO component of the expected demand E (Dkt ) a forecasting system ( μkt is the mean demand). The demand for the
for item k in period t product-period combination (k ,t ) is assumed to be independent
∼τ
Dkt Cumulative modified expected demand E (Dkt ) including from any other combination (ḱ,t )́ with k ≠ ḱ and/or t ≠ t .́
the imperfect items quantity from period t to τ 9. The received delivery ykt is placed in the previous order cycle be-
∼v Modified expected demand E (Dkt ) for item k in period v fore t = 1 (Fig. 1) and the remaining stock xkh is the stock from the
dkt
including the imperfect items quantity last period of the rolling horizon. The reason for the remaining
h′ Reached age of a perishable item stock xkh ⩾ 0 lies in the stochastic demand in grocery stores.
Hk Maximum fixed lifetime of perishable item k 10. The target customer service level βkt is taken into consideration in
G Maximum capacity of refrigerated shelves for all items this model and is defined a priori. Generally, a safety stock limits
Gkt Maximum capacity of refrigerated shelves for item k in the expected shortages and satisfies service level requirements
period t (Tempelmeier, 2011). Our inventory model requires the pre-cal-
Demand share according to LIFO principle for item k culated safety stock sskt as a parameter. We calculate the safety
ϕ LIFO
k stock for the risk period Rk + Lk . The safety stock sskt (Eqs. (7) and
λkh Ratio factor of the stock for item k which is free of (8)) is bigger than zero in the period t = t1 + Lk , if t = t1 + Lk is not
imperfect goods a closing day or otherwise in period t = t1 + Lk + CD . In all other
Lk Deterministic lead time for item k periods we set sskt = 0 . The calculation for sskt (including imperfect
LkCD Realized lead time (consideration of closing days) for items) for period t = t1 + Lk or t = t1 + Lk + CD is described in
item k Appendix A.
opent Store is open in period t if opent = 1, otherwise it is closed 11. The safety stock sskt and items for covering the demand will be
Rk Inventory order cycle for item k ordered in one process, i.e. there is only one order altogether (an
Skt Optimal order-up-to level for item k in period t example is shown in Table C.11). The safety stock sskt ages over
sskt Safety stock of item k in period t for the order cycle Rk time like other items.
t Time period (one day) 12. In our model, the safety stock sskt is consumed in the first period of

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L. Janssen et al. Computers & Industrial Engineering 118 (2018) 9–22

Fig. 1. Rolling horizon T including order cycles R and closing day CD . LCD is the realized lead time.

the order cycle Rk . But in practice, sskt may remain in the stock by Table 2
the end of the order cycle Rk . Therefore, for the remaining Rk −1 Details of the rolling horizon T including the closing day Sunday. The safety stock sst is
pre-calculated for a risk period m .
periods, inventory holding costs for sskt can exist additionally. We
take that into account in our model. We assume that only at the end Planning Order decision Delivery Safety stock sst Minimum
of the last period of the order cycle Rk , the inventory holding costs period t qt for weekday period for risk period m T length
for sskt are zero.
13. This model implements mixed LIFO- and FIFO issuing policies. Sat. Mon. Mon. m = Mon., Tue. Lk + CD + Rk
Mon. Tue. Tue. m = Tue, Wed Lk + Rk
14. The inventory model takes imperfect items (shrinkage, mortality
Tue. Wed. Wed. m = Wed., Thur. Lk + Rk
and others) and perishable items jointly into account. Therefore, Wed. Thur. Thur. m = Thur., Fri. Lk + Rk
there are parameter settings for both in our model. Imperfect items Thur. Fri. Fri. m = Fri., Sat. Lk + Rk
are linked to the ratio factor λkh (it shows the quantity of perfect Fri. Sat. Sat. m = Sat., Sun., Mon. Lk + CD + Rk
items which we have in the stock) and perishableness is linked to
the maximum fixed lifetime Hk of item k .
15. All costs can vary per unit time t . size formula from Harris (1990) according to Eqs. (24) and (27). We use
the parameter ct to limit the order quantity in an order cycle R .

3.3. Model description 3.4. Model SPIM-CD with a closing days constraint

Fig. 1 outlines the structure of a rolling horizon T for the developed Our Stochastic Perishable Inventory Model with Closing Days
inventory model with a closing days constraint. In this example, the (SPIM-CD) is defined as follows. We formulate the inventory problem as
order cycle is R = 1 day and the deterministic lead time is L = 1 day. In a mixed-integer program (MIP).
the field of quickly perishable goods, a daily reorder and delivery are The objective (1) is to minimize expected fixed costs per order, in-
typical for many grocery stores worldwide. Therefore we consider this ventory holding costs and purchasing costs (variable order costs). In the
case in Fig. 1. We plan for one perishable item in one grocery store assumption 12 (Section 3.2) of our model, we reasoned why we cal-
which is closed on Sundays. We assume non-stationary, normally dis- culate separately the inventory costs for the safety stock. Our im-
tributed demand which is independent in all periods (all assumptions in plementation of this inventory model (in the IBM ILOG CPLEX Opti-
Section 3.2). There is no demand on closing days, but the aging of items mization Studio) is available online at http://bit.ly/2ekdFi3.
takes place. The rolling horizon T includes minimum periods R + L and SPIM-CD model:
one or several coherent closing days (CD ). Delivery yt is from the last
K T K T
planning period (previous T ) and is received on the Saturday at the Min C = ∑k =1 ∑t=1 ckt ·z kt + ∑k =1 ∑t=1 bkt ·qkt
  
beginning of period t1 in this example. The order q1 > 0 is placed at the Fixed order costs Variable order costs
beginning of the order cycle R1 and arrives in period t1 + L + CD be- K T H
cause t1 + L is a closing day and the store is closed, i.e. opent = t1+ L = 0 .
+ ∑k =1 ∑t=Lk +1 ∑h=k 0 akt ·Ikth

We denote the realized lead time LCD . The risk period is m = R + LCD , Inventory costs
where LCD = L or LCD = CD + L if the delivery period t + L is a Sunday. K T
+ ∑k =1 ∑t=Lk +1 akt ·sskt ·(Rk−1)
Table 2 shows the details for the rolling planning on different days   
of the week. Consequently, for the rolling planning according to Fig. 1, Inventory costs for safety stock (1)
we are interested in the order decision q1 in period t1 (on Saturday). In subject to constraints from (2)–(19).
period t3 (on the Monday) we reorder and place an order for the Age-based stock balance constraints:
Tuesday and so on. On the Saturday, the minimum rolling horizon T
LIFO FIFO
includes 3 days (Saturday, Sunday and Monday). LCD is the lead time Ikth = xkh−E (Dkth )−E (Dkth ) ∀ t = 1; h = 1,…,Hk (2)
including the Sunday (the realized lead time). Furthermore, on the
init
Saturday we additionally calculate the safety stock sst3 for the Monday. Ikth = λkh ·Ik,t − 1,h − 1 ∀ t = 2,…,T ; h = 1,…,Hk (3)
sst3 is computed for the risk period m from Monday to Tuesday. LIFO FIFO
We assume that the fixed order costs ct are computed via a classic lot Ikth = ykt −E (Dkth )−E (Dkth ) ∀ t = 1,…,Lk ; h = 0 (4)

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LIFO FIFO
Ikth = qk,t − L CD−E (Dkth )−E (Dkth ) ∀ t = Lk + 1,…,T ; h = 0 (5) The expected demand E (Dkt ) is, according to mixed FIFO and LIFO
k
issuing policies, divided into two demands E (DktLIFO ) and E (DktFIFO ) . The
init LIFO FIFO LIFO demand is given by Eq. (7) and the FIFO demand by the remainder
Ikth = Ikth −E (Dkth )−E (Dkth ) ∀ t = 2,…,T ; h = 1,…,Hk (6)
of the demand (Eq. (8)). In addition to the expected demand component
Expected demand with mixed FIFO and LIFO issuing policies: of E (Dkt ) , the safety stock sskt is added in both equations.
E (DktLIFO ) = (E (Dkt ) + sskt )·ϕkLIFO ∀ k ∈ K S, t ∈ T S Eqs. (9) and (10) present exact FIFO and LIFO demand components
  which are sorted by age. The split of the LIFO and FIFO demand
LIFO demand component (7)
components E (DktLIFO ) and E (DktFIFO ) into the age-based demand fraction
LIFO FIFO
E (DktFIFO ) = (E (Dkt ) + sskt )−E (DktLIFO ) ∀ k ∈ K S, t ∈ T S (E (Dkth ) and E (Dkth ) ) is needed for the exact age-based withdrawal
  
FIFO demand component (8) of items from the stock.
If the stock Ikth with the age h is less than or equal to that which is
Hk LIFO
) = E (DktLIFO ) needed for the demand component E (DktLIFO ) , then this stock will be
∑h=0 E (Dkth ∀ k ∈ K S, t ∈ T S
  completely withdrawn, that is Ikth = 0 (Eq. (11) left side). Or, if the
Split LIFO demand for age − based withdrawal (9) stock Ikth is larger than needed for E (DktLIFO ) then Ikth > 0 , a part of the
Hk items remains in the stock (Eq. (11) right side). The same is also true for
FIFO
∑h=0 E (Dkth ) = E (DktFIFO ) ∀ k ∈ K S, t ∈ T S the demand E (DktFIFO ) (Eq. (12)). Both of these equations realize the
 
Split FIFO demand for age − based withdrawal (10) mixed FIFO and LIFO issuing policies for the age-based stock.
Eq. (13) initializes the binary variable z kt and limits the order
LIFO h−1
Ikth = 0 ∨ E (Dkth ) = E (DktLIFO )− ∑ LIFO
E (Dktj ) ∀ k ∈ K S, t ∈ T S, h ∈ HkS quantity qkt . The maximum order quantity is limited by the latest
j=0
  consumption period T (t ,Hk,Lk ) . For perishable goods with a fixed life,
LIFO withdrawal from stock
T (t ,Hk,Lk ) plays an important role. The latest consumption period is the
(11)
last period in which perishable goods are still available to satisfy de-
Hk
Ikt ,Hk − h = 0 ∨ E (DktFIFO
∑ E (DktFIFO )− FIFO mand. After the end of the consumption period, the goods are outdated.
= ,Hk − h ) E (Dktj ) ∀ k
  j = Hk − h + 1
We calculate the final consumption period in Eq. (20).
FIFO withdrawal from stock

∈ K S, t ∈ T S, h ∈ HkS (12) ⎧T (t ,Hk,Lk ) = min(T ,t + Lk + CD + Hk ) if opent + Lk = 0

⎨ T (t ,Hk,Lk ) = min(T ,t + Lk + Hk ) otherwise. (20)
Order constraints: ⎩

∼T (t ,Hk,Lk ) The perishable item k cannot be ordered if the store is closed (if
qkt ⩽ Dkt ·z kt ∀ k ∈ K S, t = 1,…,T −Lk (13) opent = 0 , then qkt = 0 and z kt = 0 ) (Eq. (14)). Even if the order cycle is
Rk > 1, ordering is not possible outside of inventory control periods
⎧ qkt = 0,z kt = 0 if opent = 0 ∨ (t CD mod Rk ≠ 1). If closing days exist, then the number of closing days
⎪ t CD mod Rk ≠ 1 ∧ Rk > 1, where
⎪ is CD > 0 and the order cycle Rk moves with the closing days. The t CD
if t is before closing days then t CD = t or takes this into consideration. Order periods before closing days are
⎨
⎪ if t is after closing days then t CD = t + CD ∀ t ∈ (t mod Rk = 1) and order periods after the closing days are
⎪ q ⩾ 0,z ⩾ 0 otherwise. ∀ k ∈ K S, t ∈ T S ∀ t ∈ ((t + CD) mod Rk = 1) .
⎩ kt kt (14)
The refrigerated shelves capacity constraint for item k is given in Eq.
Stock capacity and non-negativity constraints: (15). The maximum stock capacity Gkt is determined depending on the
Hk expected demand size and risk periods m = Rk + Lk + CD . The max-
∑ Ikth ⩽ Gkt ∀ k ∈ K S, t ∈ T S imum stock capacity Gkt per item k could undermine the required ser-
h=0 (15) vice level, hence it is calculated as the sum of the expected demand
K Hk E (Dkt ) and the safety stock sskt for a risk period m (Gl. (21)).
∑ ∑ Ikth ⩽ G ∀ t ∈ TS t + Rk + LkCD − 1
k=1 h=0 (16)
Gkt ⩾ sskt + ∑ E (Dki ) ∀ k ∈ K S, t ∈ T S
LIFO LIFO i=t (21)
Ikth ⩾ 0,E (Dkth ) ⩾ 0,E (Dkth ) ⩾0 ∀ k∈ K S, t∈ T S, h∈ HkS (17)
A grocery store has a limited total capacity G of refrigerated shelves.
z kt ∈ {0,1} ∀ k ∈ K S, t ∈ T S (18) Eq. (16) shows that perishable items require refrigeration. The variables
Realized lead time: for the inventory and consumption quantities are limited to non-nega-
tive values in Eq. (17). For the binary variable z kt , only the values 0 and
CD
⎧ Lk = Lk + CD if opent + Lk = 0 1 are permitted (Eq. (18)). The calculation of the realized lead time LkCD
⎨ LkCD = Lk otherwise. ∀ t = t1 + Lk ,…,T is defined in Eq. (19) and is described in Section 3.3.
⎩ (19)
The order quantity qkt is limited by the maximum possible order
The inventory balance equations (from Eqs. (2)–(6)) ensure that ∼T (t ,Hk,Lk )
LIFO FIFO quantity Dkt (Eq. (13)). The final consumption period T (t ,Hk,Lk )
expected demand (E (Dkth ) and E (Dkth ) ) is fully covered by the stock ∼τ
is defined in Eq. (20). Dkt is calculated in Eq. (22) as the sum of the
of age h = 0 or h > 0 (h = 1,…Hk ) in each period. The remaining stock
cumulative modified expected demand quantity (including imperfect
xkh is the initial stock in t = 1 of the planning horizon T (Eq. (2)). The
init items) and the safety stock sskt . The next period τ of t is included in:
stock xkh has the age h > 0 . The waste-free initial stock is called Ikth (Eq.
τ ∈ {t + LkCD + 1,…,T (t ,Hk,Lk )} . The realized lead time LkCD takes the
(3)). ykt is the last order which is placed in the previous rolling plan- ∼τ
closing days into consideration. Dkt ⩾ 0 is only possible if the store is
ning. In periods t = 1,…,Lk , the demand of the product with the age ∼τ
h = 0 is fulfilled from the delivery ykt , if this exists (Eq. (4)). In period not closed in period t (if opent = 1), otherwise Dkt = 0 .
t = t1 + Lk ,…,T , the order qk,t − L CD (placed in period t −LkCD ) arrives (Eq. ∼τ
τ τ
∼v
k D kt = (E (Dk,t + L CD ) + ∑ sski + ∑ dkt )· opent ∀ k ∈ K S, t ∈ T S
(5)), where t −LkCD is the realized order period. The realized order period k
i = t + LkCD v = t + LkCD + 1
is either t −Lk or t −Lk −CD (if opent − Lk = 0 then it is t −Lk −CD ). The
(22)
initial stock Ik,t − 1,h − 1 has no imperfect items (Eq. (6)). The ratio factor
∼v ∼v
λkh shows how many perishable goods remain in storage (the stock is The modified expected demand dkt is counted instead of E (Dkv ). dkt
free of imperfect items). additionally includes imperfect perishable items (Eq. (23)).

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L. Janssen et al. Computers & Industrial Engineering 118 (2018) 9–22

Fig. 2. Flowchart of the solution algorithm for the order decision with help of the IBM ILOG Solver.

h′ 5. Simulation study
∼v
dkt = E (Dkv ) ∏ λkj ∀ k ∈ K S, t ∈ T S
j=1 (23) The simulation scenarios are presented in Section 5.1. Section 5.2
introduces the case study for the simulated supermarket chain proto-
The age h′ of a perishable item k from period t to period v is derived type with prepared fresh meals under a rolling planning. Section 5.3
from the difference of the two periods: h′ = max (0,v−t −LkCD ) . In
∼τ presents the input and output of the simulation model. Section 5.4
Appendix B we show an example for the calculation of Dkt . describes the experimental design including a simulation environment,
data and pattern of demand.

4. The solution algorithm

5.1. Simulation scenarios
We use the following algorithm for our optimization problem
(Fig. 2). First, we define and formulate the inventory model SPIM-CD In this section, we present four simulation scenarios as follows:
from Section 3.4 (phase 1). In phase 1, we generate most parameters of
this model and identify the decision variable qkt . In phase 2, we call the
IBM ILOG Solver and get results from the model SPIM-CD. We start the • The scenario 6-CD-I-S considers closing days in the inventory model
and in the rolling planning. The planning is accurate because the
initialization of the following remaining parameters in the pre-proces-
∼τ optimization includes closing days of grocery stores. Grocery stores
sing phase of the optimization (in phase 2): Dkt (Eq. (22) and example in this scenario are open 6 days and have one closing day (Sunday).
∼v
in Appendix B), dkt (Eq. (23)), E (Dkt ) and E (DktLIFO ) (Eq. (7) and (8))
•
LIFO
The scenario 6-CD-NI-S has grocery stores open 6 days. In this sce-
and LkCD (Eq. (19)). The optimization of the order quantity qkt for each nario the inventory model does not consider closing days, but the
item k is performed in the execution phase. In the post-processing phase rolling planning considers them. We assume that this scenario is
of the optimization, we save each optimization result qkt from the ex- included in many inventory models, where closing days are not
ecution phase in a file. We use these optimization results in the simu- considered in the mathematical optimization.
lation model (Section 5.2) as optimal order quantities in period t .
Our implementation of phases 1 and 2 is available online at http://
• In scenario 6-CD-NI-NS, the inventory model and a rolling planning
ignore closing days. In this scenario, there are no Sundays. This sce-
bit.ly/2ekdFi3. The inventory model SPIM-CD is saved in the file SPIM- nario can arise in a situation in which decision makers completely
CD-1.mod. All files with the ending dat are different parameter files for ignore the closing days of stores in operational or tactical decisions.
the inventory model SPIM-CD. The parameter files have all values for Therefore, we have included this scenario in our investigation.
this inventory model from phase 1 in Fig. 2. We show the results of
applying the solution algorithm to the numerical case in Appendix C. It
• In scenario 7-NoCD all stores are open 7 days a week. This scenario is
needed only for the comparison to stores open 6 days a week.
is noted that the file SPIM-CD-2.mod can be used for testing our im-
plementation of the model SPIM-CD direcly in the IBM ILOG CPLEX Table 3 summarizes the basic settings of the four scenarios:
Optimization Studio (We can see the order solutions directly in this
optimization studio).

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L. Janssen et al. Computers & Industrial Engineering 118 (2018) 9–22

Table 3
Basic settings for four scenarios.

Scenario Days open Inventory model Rolling planning Notice

per week considers closing day considers closing day

6-CD-I-S 6 Yes Yes Proposed order decision includes closing days constraint
6-CD-NI-S 6 No Yes Typical order decision without closing days constraint
6-CD-NI-NS 6 No No Decision maker ignores closing days completely
7-NoCD 7 – – Closing day does not exist (because the store is open from
Monday to Sunday)

Fig. 3. Flowchart for a daily replenishment process in a simulated retail store.

5.2. Supermarket chain prototype with prepared fresh meals
The illustration of a realistic case study is based on the work of
Weteling (2013) with a description of the operational replenishment
process in the largest supermarket chain in the Netherlands. We create a
prototype for a supermarket chain in our simulation model (Fig. 3). We
use the supermarket chain prototype for the order problem of fresh,
prepared ready-to-eat meals which are offered year-round in all grocery
stores. The maximum fixed lifetime Hk of prepared fresh meals is
3–5 days. Waste of perishable goods can occur after the expiry of the
maximum lifetime. The daily replenishment routine for quickly per-
ishable goods in each store of the supermarket chain prototype is
simplified and simulated in the steps outlined in Fig. 3. The aging of
perishable goods occurs daily. Waste quantities will be determined and
removed from the inventory, except on Sundays. Next, deliveries will be
received. The order quantity is determined in the step ‘Call IBM ILOG
Solver’ in the first period of a new order cycle. We show details of this
step in Fig. 2. If needed, an order is placed in the next step. Random
demand is realized according to the given mixed FIFO and LIFO issuing
policies. If the order cycle of items is different, then the parameter G
(total stock capacity) must be modified accordingly.
Dependent on the simulation scenarios (Section 5.1), the simulated
supermarket chain has stores open either 6 or 7 days weekly. In the
simulation scenarios 6-CD-I-S, 6-CD-NI-S and 6-CD-NI-NS all stores are
open 6 days weekly and in the scenario 7-NoCD stores are open 7 days.
In all stores a high target β -service level (fill rate) is required (β = 99%).

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L. Janssen et al. Computers & Industrial Engineering 118 (2018) 9–22

Table 4 Table 5
Mixed FIFO and LIFO issuing policies in the mathematical inventory and simula- Parameters of inventory model in all scenarios.
tion models.
Monetary parameters (Inventory and simulation model)
Item k FIFOk LIFOk
Fixed order costs ckt Eq. (27)
Inventory holding cost akt 1;3 MU/QU
1; 8 40% 60%
Variable order costs bkt 60 MU/Order
2; 7 50% 50%
Waste costs wkt 73 MU/QU
3; 6 60% 40%
4; 5 70% 30% Non monetary parameters (Inventory and simulation model)

Lead time Lk 1 time daily

Expected demand Table 6
The realized β -service level is measured in stores over all periods. Not LIFO and FIFO issuing policies Table 4
satisfied demand is lost and lost sales are unobservable. This is typical Maximum fixed lifetime Hk 2;3;4
for grocery retail. Maximum stock capacity Gkt Eq. (21)
Total stock capacity G 15,000 QU
Each simulation scenario reproduces a supermarket chain with 10
Number of store groups F 10
store groups, each with 8 perishable items (prepared fresh meals). A Number of items K 8 per store group
group includes 20 grocery stores. This grouping of stores allows for the Order cycle Rk Daily
realization of a high demand per store group. The demand distribution Rolling horizon T 3;5
function is equal in the prototype in all store groups, but the random
realized demand varies per store group. Demand in a store group is
summed up together. The stock capacity is sufficiently available in of key performance indicators from F = 10 grocery store groups with 8
stores for a stochastic demand coverage. perishable items each. The important key performance indicators are: β
Table 4 shows the different factors of the mixed FIFO and LIFO (avg. realized β -service level), I t CD (avg. total stock level), w t CD (avg.
inventory issuing policy for the 8 perishable goods in each store group. waste quantity), z (avg. relative outdating, see Eq. (28)), C (avg. total
For example, withdrawals of stock are based 40% on the FIFO and 60% costs), qt (avg. order quantity, it is a decision variable) and h (avg.
on the LIFO issuing policy for the items k = 1 and k = 8. inventory age). Each experiment has its unique inputs and outputs.

5.3. Simulation model 5.4. Experimental design

Fig. 4 shows the inputs (variable parameters), the outputs and the
constant parameters of the simulation model. The call of the IBM ILOG
Solver returns an optimal order quantity qkt for each item k and all si-
mulated grocery stores. All model parameters are defined in Table 5.
Table 5 shows that the variable parameters in Fig. 4 can have the
following values:
• P = U for a systematic demand, P = W for a weekday trend de-
k k
mand and P = S for seasonal demand pattern (3 values),
k a rolling planning horizon. The inventory order cycle is Rk . The period t
• a = 1; 3 MU/QU,
kt
• H = 2; 3; 4 days and
k generated for the realized demand in stores (see the demand distribu-
• T = 3; 5 periods.
We use a full factorial design for variable parameters. With the
combination of all values of variable parameters (3·2·3·2 = 36), we
have a set of 36 experiments per simulation scenario or 144 experi-
ments for all four scenarios together (36·4 = 144 ). An experiment is
defined for one of four scenarios: 6-CD-I-S, 6-CD-NI-S, 6-CD-NI-NS or 7-
NoCD. The results of all 144 experiments (tables with the simulation
results including the inputs and the outputs of the simulation model)
are available online at http://bit.ly/2nH9Ya2.
The output of the simulation model (Fig. 4) includes average values
5.4.1. Simulation environment
We use the simulation tool Tecnomatix Plant Simulation Version
11.0.0 by Siemens for the development of our simulation model. The
IBM ILOG Solver Version 12.6.1 calculates an optimal solution for the
order problem. A simulation runs on a computer system with the fol-
lowing technical details: 64-bit OS Windows 7 Professional SP1, CPU
Intel Xeon (R) 12 Cores 2.10 GHz, RAM 16 GB, SCSI disk device.
The developed discrete-event simulation model is implemented with
is a planning period in the rolling horizon T . Random numbers are
tion functions in Table 6) using the Monte Carlo method before the start
of an experiment. Simulation modeling and rolling planning are de-
scribed in Law and Kelton (2000).
The length of a simulation run is 730 periods (≈ 24 months). In the
beginning of a simulation run there are 90 transient or warm-up periods
(3 months) that cause bias in the results. We exclude warm-up periods
from the simulation results. These are calculated for the remaining 640
periods (≈ 21 months). The transient period clearly has more periods
than necessary for the system to exhibit a steady state of behavior. The
estimated standard error for the average β -service level is ± 0.002 of its
mean value with 95% confidence. All simulation runs were started with

Fig. 4. Input and output of the simulation model.

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L. Janssen et al. Computers & Industrial Engineering 118 (2018) 9–22

Table 6 by a mean μ and a standard deviation σ . The demand is normally dis-

Expected demand per store group (per period t without closing days). tributed. The coefficient of variation of the demand is cv = 0.20,…,0.25
(cv = σ / μ ). The distribution functions of demand from Mondays to
Demand pattern (P ) Demand per store group (QU/t)
Saturdays in stores open 6 days per week do not include Sundays be-
Systematic (U ): For scenarios with 6;7 open days cause the demand on Sundays is zero. The total demand per month is
Monday-Saturday μ = 161, σ = 40 approximately equal in stores open 6 and 7 days weekly. However, in
Weekday trend (W ): For scenarios with 6;7 open days
stores open 7 days, the demand on Mondays and Sundays is half of the
Monday-Saturday μ = 80;145;180;240;80;240;0
σ = 20;36;45;50;20;50;0
Monday demand of stores open 6 days per week.
Seasonal (S ): For scenarios with 6;7 open days
Winter μ = 70 , σ = 17 6. Simulation results
Spring μ = 200 , σ = 50
Summer μ = 240 , σ = 50
Section 6.1 includes the analysis of the simulation scenarios and
Fall μ = 120 , σ = 30
Section 6.2 the sensitivity analysis for the developed mathematical in-
ventory model with a closing days constraint. Please note that we dis-
non-zero inventories (the calculation for the initial stock in period t0 is tinguish between average simulation results per period t , where closing
shown in Eq. (A.7)). days are not considered and results where closing days are inclusive.
For example, stores order only on open days, hence the average order
quantity t is calculated over the open days t . Stock I t CD and waste w t CD
5.4.2. Simulation data
exist also if stores are closed, hence we compute the results including
In this section, we define the data of experiments for the simulation
closing days.
scenarios from Section 5.1. All used variable and constant parameters
are listed in Table 5. Each simulation scenario has identical settings
from Table 5, where costs are stated in monetary units (MU) per one 6.1. Scenario analysis
quantity unit (QU) or per store group. The scenarios differ only in the
consideration of closing days (see Table 3). In this section we analyse the results of our simulation study. All
We exclude imperfect items which occur in prepared fresh meals, so simulation results and the full scenario analysis are available online at
that the results of our simulation study can be analyzed more easily http://bit.ly/2nH9Ya2.
within the frame of the problem investigated here. However, since
imperfect items exist in grocery stores, we have taken this into con- 6.1.1. Average total waste quantity
sideration in the inventory model. We measure the average relative outdating z as the average ratio
The fixed order costs ck are calculated via a classic lot size formula between the outdating quantity and the mean demand μfkt in a time
from Harris (1990) with a given inventory coverage ICk in days. After period T ′ over F store groups and K perishable items for each store
the transformation of the lot size formula, whereby ak is the inventory group f in a simulation run. For this we use Eq. (28) (analogous to van
cost and the mean demand is μk for item k , we get the fixed order costs Donselaar & Broekmeulen, 2012; Weteling, 2013), where T ′ is a time
ck for the stationary normally distributed demand (Eq. (24)). period of 21 months (in our study); F is the number of store groups; wfkt
is the waste quantity and μfkt is the mean demand of item k in stores
ck = (ICk2/2)·μk ·ak (24) group f in period t CD .
If we plan for an order cycle Rk , then the inventory coverage ICk is F K T′

equal to the order cycle Rk . In case of a non-stationary normally dis- z = 100%· ∑ ∑∑ wfkt / μfkt
tributed demand, the average expected demand μktavg is calculated as the f =1 k=1 t=1 (28)
mean of the expected demand μkt per period t in the time period from t We remind the readers that the realized demand d differs slightly in
to t + Rk −1 (Eq. (25)). scenarios with 6 or 7 open days. Table 7 shows the average realized
t + Rk − 1 demand d per store group for 8 items in the scenarios. We see the
μktavg = (1/ ICk )· ∑ μkt difference of 0.67% between d in scenarios 6-CD-I-S, 6-CD-NI-S and 6-
i=t (25) CD-NI-NS versus scenario 7-NoCD. The reason for this is that the
The same applies to the calculation of the average inventory costs Monday demand in stores open 6 days weekly is distributed between
aktavg , where akt is the inventory cost per period t (Eq. (26)). Sunday and Monday in stores which are open 7 days a week (Section
5.4.3).
t + Rk − 1
The results of the average relative outdating of all experiments with
aktavg = (1/ ICk )· ∑ akt
i=t (26) the rolling planning T = 3 are shown in Table 8. The most waste occurs
with items with the maximum fixed lifetime Hk = 2 and it is several
The fixed order costs ckt for non-stationary normally distributed times lower if the lifetime is Hk = 4 . According to this calculation, the
demand is shown in Eq. (27) with a given order cycle Rk (in days). average relative outdating z in scenario 6-CD-NI-S (z = 6.79%) is
ckt = (Rk2 /2)·μktavg ·aktavg higher by 0.12 (1.77%) compared to scenario 6-CD-I-S (z = 6.67 %),
(27)
where scenario 6-CD-NI-S excludes and scenario 6-CD-I-S includes a
closing days constraint in the mathematical inventory model. The
5.4.3. Demand pattern
Three patterns of stochastic demand are realized in our simulation Table 7
Average demand per store group for 8 items.
model: a systematic, a seasonal and a weekday trend. In the systematic
demand, the demand is evenly distributed throughout the entire year. Scenario Avg. demand d Open days ∑d
Seasonal demand is expected to be largest in summer, middle in spring per day per month per month
and fall, and lowest in winter. The weekday trend of demand follows a
pattern of values dependent on the weekday. On each weekday, de- 6-CD-I-S 1294 26 33,644
6-CD-NI-S 1294 26 33,644
mand can vary.
6-CD-NI-NS 1294 26 33,644
Table 6 includes the distribution functions by demand pattern per 7-NoCD 1129 30 33,870
store group. The distribution functions of demand are exactly described

17
L. Janssen et al.
Table 8
Average relative outdating z by a maximum lifetime Hk in a time period of 21 months per
store group (Rolling planning T = 3 days).
Scenarios Hk = 2 Hk = 3 Hk = 4
6-CD-I-S 14.25% 4.67% 1.08%
6-CD-NI-S 14.35% 4.85% 1.17%
6-CD-NI-NS 10.01% 2.39% 0.45%
7-NoCD 11.83% 3.65% 0.84%
reduction of the average relative outdating in a scenario with 7 days
open (z = 5.43%) lies in mean at 1.24 (18.60%) in comparison to the
scenario 6-CD-I-S.
For example, in diagram Fig. 5 we show details of an average daily
waste quantity for the weekly trend and the seasonal demand patterns.
Waste quantities decrease with both demand patterns in scenario 6-CD-
I-S in comparison to scenario 6-CD-NI-S.
6.1.2. Average total costs
The total costs C per store group per day result from the fixed and
variable order costs c , inventory holding costs and waste costs for 8
items together. Appendix D describes details of the calculation of C in
the simulation scenarios.
Table 9 shows the average daily total costs for 8 items in the four
simulation scenarios. In scenario 6-CD-I-S (with a closing days con-
straint in the inventory model), the average total costs of all experi-
ments are C = 822.25 Euro/day. In scenario 6-CD-NI-S, the total costs
are higher by 0.29% and in scenario 6-CD-NI-NS, the total costs are
lower by 5.65% than in scenario 6-CD-I-S. If a store is open 7 days
(scenario 7-NoCD), then the total costs are reduced by 1.88% in con-
trast to scenario 6-CD-I-S.
6.2. Sensitivity analysis
The sensitivity analysis is based on the simulation results of the
scenario 6-CD-I-S because this scenario realized the mathematical in-
ventory model with a closing days constraint.
If the maximum fixed lifetime Hk is low, then the average relative
outdating z is high. For example, if Hk = 2 then the relative outdating z
in all experiments is between 15.38% and 12.85%, but if Hk grows to
Hk = 4 , the average relative outdating z is between 1.33% and 0.92%.
The lifetime Hk has a relation to the order quantity qt - if the maximum
fixed lifetime Hk is longer, then qt decreases because there is a lower
waste quantity. In contrast to this, the average inventory level I t CD has
the tendency to increase, if the maximum lifetime Hk grows. The reason
for this is that more items can stay in stock longer. This is also con-
firmed in the analysis of the average stock age h which grows steadily
with the increase of the maximum lifetime Hk . The average total costs C
decrease with a greater maximum lifetime Hk because the waste
quantity w t CD decreases strongly.
The increase of the inventory holding cost a has no influence on the
Fig. 5. Average daily total waste quantity in a store group for 8 items (The rolling horizon is T = 3 days).
Computers & Industrial Engineering 118 (2018) 9–22
Table 9
Average daily total costs per store group for 8 items (Rolling planning T = 3 days).
Scenarios 6-CD-I-S 6-CD-NI-S 6-CD-NI-NS 7-NoCD
Avg. z
Euro/t Euro/t Euro/t Euro/t
6.67% Avg. total costs C 822.25 824.61 775.78 806.75
6.79%
4.28%
5.43% order quantity because we calculate the fixed order costs under con-
sideration of a . However, the total costs C increase as expected. The
increase of the rolling horizon from T = 3 to T = 5 only has an influence
on the seasonal but not on the systematic and weekday demand pattern.
We observe in the seasonal demand pattern that the order quantity q
decreases if the rolling horizon is increased from T = 3 to T = 5. This is
due to a higher optimization flexibility (if T is longer), particularly
when seasons are changing. The decrease of the order quantity q has a
slightly positive effect on the fallen stock level I t CD and the average total
costs C and leads to a small reduction of the waste quantity w .
7. Discussion
The key finding of our scenario analysis is that the developed in-
ventory model with a closing days constraint leads to a more efficient
inventory management of perishable goods in grocery stores. In sce-
nario 6-CD-I-S (with our mathematical inventory model with a closing
days constraint), the total average costs are cut by 0.29% and relative
outdating falls by 1.77% in contrast to the scenario 6-CD-NI-S, in which
the mathematical inventory model is without a closing days constraint.
Order decisions are different in both scenarios, although the scenarios
differ only by the inclusion/exclusion of closing days in the mathema-
tical inventory model. The differences in the order decisions have an
effect on the stock level, stock age, waste quantity and final total costs
in stores. Moreover, the rolling horizon with 5 days (T = 5) in contrast
to the horizon T = 3 leads to a slight reduction of costs and waste in a
few of the experiments.
Another outcome of our study is that in a real-life situation no op-
erational or tactical decisions should be made on the basis of scenario 6-
CD-NI-NS in which closing days are completely ignored in the mathe-
matical model and in the rolling planning. These decisions would be
based on solutions which deviate significantly from reality and would
lead to an overly optimistic prediction of costs and waste quantities in
stores.
Our simulation study extends findings of Weteling (2013) with new
studies on other demand patterns and mixed FIFO and LIFO issuing
policies. Weteling (2013) shows that the effect on outdating by the
number of days open is very small. The average relative outdating z in
stores open 7 days decreases by 2.40% in comparison to stores open
6 days (Weteling, 2013, p. 28 Table 6). In our experiments, the average
relative outdating is reduced by 18.60% and total costs by 1.88% if
stores operate 7 instead of 6 days weekly. It should be noted that the
additional costs on Sunday for staff, electricity, etc. are not taken into
consideration and that the realized demand is not completely identical
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in experiments with stores open 6 or 7 days weekly.
Furthermore, Weteling (2013) determines that the Friday deliveries
had the most outdating in his simulations. We can likewise confirm that
on certain weekdays there was always significantly more waste than on
other weekdays. This knowledge can be put to use in waste reduction. If
it is known in advance (for example via a simulation study) how the
waste quantities will be distributed over the weekdays, then preventive
measures (discounts etc.) can be planned and the waste of perishable
goods can be reduced.
8. Conclusion
In this work we develop a new perishable inventory model with a
closing days constraint. We evaluate this model in a simulation study
and analyze the influence of a closing days constraint.
The results of our simulation analysis show that the inclusion of
closing days leads to a reduction of the average relative outdating of
1.77% and an average decrease of 0.29% in total costs in grocery stores
in comparison to inventory model scenarios which ignore weekly
closing days. Hence, order decisions may be suboptimal if the inventory
management for quickly perishable items ignores real existing closing
days in grocery stores. The reduction of 1.77% appears relatively small,
however, considering 750,000 tons of food waste yearly (according to
the study of Kranert et al. (2012) which looks at Germany’s grocery
retail and wholesale) this results in a waste reduction of 13,275 tons a
year.
The worldwide waste problem in food retail has not yet been solved.
For the reduction of waste, further development of logistic and ordering
tools will be necessary (Kranert et al., 2012, p. 30). The inventory
model developed in our study can be integrated into such tools for
grocery stores operating with weekly closing days. Moreover, decision
makers can use the proposed simulation model for their own retail
chain to support tactical decisions. We show in this work that a simu-
lation study can provide a sufficient overview of the described planning
scenarios in grocery stores. For example, the simulation study shows
that the waste problem in grocery stores cannot be resolved by opening
7 instead of 6 days weekly. Our study shows, however, that if stores are
open additionally on Sundays and the demand on this day is accurately
and reliably estimated, a significant waste reduction (here at 18.60%) is
observed.
There are several application fields in which the developed in-
ventory model can be applied apart from grocery stores: for example, in
health food stores, bakeries and other grocery stores which offer per-
ishable goods and have closing days per week. For future research, we
will extend the developed model and consider the stores operating half
day closed instead of the whole closing days. Kahn and Schmittlein
(1989) identify that total demand increases when stores are open 7 days
a week. The increase of demand leads to higher stock levels which
could influence the waste quantities in stores. A new simulation study is
needed in order to complete a more comprehensive analysis for a retail
chain open on Sundays. In another simulation study, we will investigate
grocery stores during holidays and marketing campaigns. We will fur-
ther analyze the waste and cost in stores which manage their inventory
with and without closing days.
Acknowledgment
The authors are grateful to the editorial team and anonymous re-
ferees for their constructive comments to improve the quality of the
paper.

Appendix A. The safety stock

We calculate the safety stock ssktm and add it to the parameter sskt of the mathematical model from Section 3.3. We add the safety stock ssktm to the
parameter sskt in the start period t of the risk period m (see step 7). We calculate the safety stock ssktm in an analogous manner as a periodic order-up-to
policy (this section follows the (r,S) policy in Tempelmeier (2011)), however we consider the non-stationary demand, imperfect items and closing
periods in our calculation.
Calculation of the safety stock ssktm : The target β -service level is defined as a fill rate and is expressed as a 100% service level minus the lost sales as a
percentage of the total demand (van Donselaar & Broekmeulen, 2012). The expected demand in a risk period m is non-stationary and normally
distributed. The mean μkt and standard deviation σkt are defined for item k in each period t . The expected demand is independent in all periods and is
zero on all closing days. We start the calculation with period rStart = t1 + LkCD . The last period of the order cycle Rk is rEnd = t1 + LkCD + Rk −1. The
safety stock ssktm is determined for the risk period m , where the first period of the risk period is mStart = t1 + LkCD and the last period is
mEnd = t1 + LkCD + Rk + Lk −1 or mEnd = t1 + Lk + Rk + LkCD−1 (if opent1+ Lk + Rk + Lk = 0 , it is a closing day). We calculate ssktm below in steps 1–6.
Step 1: The classic calculation for the cumulated expected demand E (DktRk ) for a time period Rk does not consider imperfect items and will be
∼τ
determined according to the equation: E (DktRk ) = μkt ·Rk . We expand this equation considering the quantity of imperfect items analogous to Dkt and
non-stationarity of demand (Eq. (A.1)):
rEnd h′
E (DktRk ) = μk,rStart + ∑ μki ∏ λkj
i = rStart + 1 j=1 (A.1)
The current age h′ of items is calculated as: h′ = max(0,i−rStart ) .
Step 2: The classic standard deviation in a risk period m = Rk + Lk does not consider imperfect items and will be determined according to the
equation: σktRk + Lk = σkt · (Rk + Lk ) . We expand this equation and consider imperfect items and non-stationarity of demand (see Eq. (A.2)).
m h′
σktm = σk2,mStart + ∑i =End σ2 / ∏
mStart + 1 ki j=1
λkj
(A.2)
The current age h′ of items is calculated as: h′ = max (0,i−mStart ) .
Step 3: In the application of the β -service level, the expected shortages in the time period Rk are equal to Eq. (A.3), where E (DktRk ) is computed in
Eq. (A.1).

JktRk ⩽ (1−β )·E (DktRk ) (A.3)

Step 4: Eq. (A.4) computes the expected standardized shortages as a division of values from Eqs. (A.3) and (A.2).

Jkm: N (0,1) = JktRk / σktm (A.4)

Step 5: Let ϕ (μkt ) and Φ(μkt ) denote the density function and the probability function of a random variable (demand) following a standard normal

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L. Janssen et al. Computers & Industrial Engineering 118 (2018) 9–22

distribution. The safety factor z kt∗ can be computed (Eq. (A.5)) via the inverse loss function of a first order Lkt−1.
z kt∗ = Lkt (Jkm: N (0,1) )−1 (A.5)
Step 6: To determine the safety stock ssktm , whereby the maximum expected shortage is respected, we use results from Eqs. (A.2) and (A.5) and get
Eq. (A.6):
ssktm = σktm·z kt∗ (A.6)
We use the optimal inventory level Skt in our simulation study as an initial start stock xkh in period t1. It is computed (Eq. (A.7)) also analogous to
the periodic order-up-to policy (r ,S ) as the sum of the demand and the safety stock ssktm (Eq. (A.6)) in the risk period m .
mEnd h′
Skt = μk,mStart + ∑ μki ∏ λkj + ssktm
i = mStart + 1 j=1 (A.7)
The current age h′ of items is calculated as: h′ = max (0,i−mStart ) .
Step 7: Definition of the model parameter sskt (Eq. (A.8)). We add the safety stock ssktm to the model parameter sskt in period t = mStart = t1 + LkCD .
ssk,t = mStart = ssktm (A.8)
Example: We use Fig. 1 again for this calculation example of the safety stock for Mondays. We plan on the Saturday (in period t1) for the coming
Monday (period t3 ). The order cycle Rk = 1 and the lead time Lk = 1. The parameter opent for the days Saturday, Sunday, Monday and Tuesday is
defined as follows: opent = 1,0,1,1, where one closing day exists (CD = 1) in period t2 . The delivery period of the order q1 is rStart = t1 + Lk + CD = 3
(Monday). Since Rk = 1, the last period of the order cycle is rEnd = t1 + Lk + CD + Rk −1 = 3. The risk period is m = Lk + Rk . The first period of m is
mStart = t1 + Lk + CD = 3 and the last period is mEnd = t1 + Lk + CD + Rk + Lk −1 = 4 . The β -service level is 99%. The expected demand in periods
t = 1,2,3,4 of a rolling horizon T is μkt = 120,0,80,120 and the standard deviation is σkt = 30,0,20,30 . In the risk period m , μkt is normally distributed
H
and independent in all periods. There are only perfect items (λkh = 1 in all cases where h = 1,…,Hk ), thus ∏k,kj = 1 λkj =1. The demand on the Saturday
is met from the initial stock xkh and from the delivery yk,1. The cumulated expected demand in order cycle Rk is E (DktRk ) = μk,rStart = μk,3 = 80 QU (Eq.
(A.1)). The cumulated expected standard deviation for the risk period m (Eq. (A.2)) is
m i−m 4 4−3
σktm = σk2,mStart + ∑i =End σ 2 / ∏ j = 1 Start =
mStart + 1 ki
σk2,3 + ∑i = 4 σki2 / ∏ j = 1 = 202 + 302/1 = 36.05 QU. The expected shortages are (Eq. (A.3))
= (1−0.99)·80 = 0.8 QU. The standardized shortages for the risk period m result from Eq. (A.4): Jkm: N (0,1) = JktRk / σktm = 0.80/36.05≈ 0.0222. The
JktRk
inverse of the first-order loss function determines the safety factor (Eq. (A.5)): z kt∗ = Lkt (0.0222)−1=1.62. The safety stock for the Monday is then
determined according to Eq. (A.6): ssktm = σktm·z kt∗ = 36.05·1.62 ≈ 58 QU. The optimal inventory level (Eq. (A.7)) is
m 4
Skt = μk,mStart + ∑i =End μ /1 + ssktm = μk,3 + ∑i = 4 μki /1 + 58 = 80 + 120/1 + 58 = 258 QU.
mStart + 1 ki
In this example we add the safety stock ssktm in period t = t1 + Lk + CD = 3, because opent1+ Lk = 0 (The store is closed in period t1 + Lk ). The
parameter safety stock is sskt = 0,0,58,0 (see example in the file 1-SPIM-CD-1Item-R1-L1-ClosingDay.dat at http://bit.ly/2ekdFi3).

∼τ
Appendix B. Calculation example for the parameter Dkt

∼τ
For the calculation of the cumulative modified expected demand Dkt we apply Eq. (22). We use Fig. 1 once again and also the example of
∼τ
Appendix A. For a complete example of Dkt (including the implementation of our inventory model) see http://bit.ly/2ekdFi3 (file SPIM-CD-1.mod or
SPIM-CD-2.mod).
In a store, the expected demand μkt for each item k is normally distributed and independent in all periods t : μkt = 120,0,80,120 in t = 1,2,3,4 .
Unlike the example of Appendix A, these are imperfect items and the ratio factor λkh of the remaining perfect items is definite as follows:
λkh = 0.90,0.90 for h = 1;2 . Hence, the pre-calculated safety stock is higher (sskt = 0,0,64,0 ) than in the example of Appendix A. It covers the demand
uncertainty in periods t = 3,4 . The maximum fixed lifetime is Hk = 2 (3 days).
∼τ ∼τ
Table B.10 shows an easy example for the cumulative modified expected demand Dkt . Dkt = 0 if t = 1,…,t + Lk −1 (see Lk in Table B.10) or if the
store is closed opent = 2 = 0 (see CD in Table B.10) or if the item k is outdated (not shown in Table B.10).
∼τ = 4 ∼τ
Calculation for Dk,t = 1: Dkt for t = 1 and τ = 4 is the sum of demand from period t1 + LkCD to τ plus the pre-calculated safety stock. Step (1): The sum
τ i − (t + L CD ) 4 1 ∼4
of demand is μk,t + L CD + ∑i = t + L CD + 1 μki / ∏k,j = 1 k λkj = μk,3 + ∑i = 4 μki / ∏k,j = 1 λkj = μk,3 + μk,4 /0.90 = 80 + 120/0.90 = 213. Step (2): Dk,t = 1 ad-
k k
∼4 4
ditionally includes the sum of the safety stock sskt from t = 3 to t = 4 : Dk,t = 1 = 213 (see step 1) + ∑i = 3 sskt = 213 + 64 + 0 = 277.

Table B.10
∼τ
Example for cumulative modified expected demand D kt with restrictions for lead time Lk , maximum lifetime Hk and closing days CD

t 1 2 3 4

1 Lk CD 157 277
2 – CD CD CD
3 – – Lk 120
4 – – – Lk

Appendix C. Applying the solution algorithm

Example for the numerical case of applying the solution algorithm: The parameter file 1-SPIM-CD-1Item-R1-L1-ClosingDay.dat (online at http://bit.ly/
2ekdFi3) has the following values: planning horizon T = 4 days, items number K = 1, lead time Lk = 1 day, big number M = 999,999, maximum

20
L. Janssen et al. Computers & Industrial Engineering 118 (2018) 9–22

lifetime Hk = 2 days, order cycle Rk = 1 day, the ratio factor for the FIFO demand is ϕkFIFO = 0.4 and for the LIFO demand is ϕkLIFO = 0.6, maximum
total inventory capacity is G = 1000 QU and for item k = 1 is Gk = 378 QU. In this example, there are no imperfect items (λkh = 1, where h = 1,…,Hk ).
The inventory holding costs akt = 3,3,3,3 MU/t and the variable order costs bkt = 60,60,60,60 MU/QU are equal in periods t = 1,2,3,4 for item k = 1.
The fixed order costs are ckt = 180,0,120,180 MU/order in the periods t = 1,2,3,4 . The initial stock has 80 QU of age h = 2 ( xkh = {0,80} ). The delivery
for item k = 1 is ykt = 80 QU. The store is closed in this planning horizon in period t = 2 (opent = 1,0,1,1). The expected demand in the periods
t = 1,2,3,4 of rolling horizon T is μkt = 120,0,80,120 QU and the safety stock is sskt = 0,0,58,0 QU.
For the described parameter file 1-SPIM-CD-1Item-R1-L1-ClosingDay.dat, the IBM ILOG Solver returns the order decisions qkt = 130,0,120,0 QU for
the periods t = 1,2,3,4 . These order decisions are saved in the file SPIM-CD-Solution.txt (at http://bit.ly/2ekdFi3) in the post-processing phase of the
optimization (Phase 2 in Fig. 2).
In the following, we describe why the IBM ILOG Solver leads to these order decisions (Table C.11). At the beginning of the period t = 1 we have
the stock IkStart ,t = 1,h with 80 QU of the age h = 2 (It is the initial stock xkh ) and with 80 QU of the age h = 0 (It is the delivery yk ,t = 1 ). We split the expected
demand E (Dk,t = 1) in the expected FIFO and LIFO demand components. In period t = 1, the FIFO demand component of E (Dk,t = 1) is calculated as
E (DkFIFO
,t = 1 ) = 48 QU (120 ϕk
· FIFO = 120 · 0.4 = 48) and the FIFO demand component is E (DkLIFO FIFO
,t = 1 ) = 72 QU (120 - E (Dk ,t = 1 ) = 120–48 = 72). The
FIFO LIFO Start
demand E (D kt ) is satisfied from the oldest stock and the demand E (Dkt ) from the freshest stock kth . At the end of the period t = 1, the
I
inventory level IkEnd ,t = 1,h = 2 has 32 QU of the age h = 2 . In period t = 1, the order quantity is qk,t = 1 = 130 QU. It is required to meet the demand in the
period t = 3 because in the period t = 2 the store is closed. In the period t = 2 , only the aging of items takes place, no sale. 32 QU of item k = 1 are
outdated in the period t = 2 because the reached age of 4 days (h = 3) is higher than the maximum lifetime Hk = 2 (3 days). In the period t = 3, the
stock of 138 QU (the sum of the expected demand E (Dk,t = 3) = 80 QU plus the safety stock ssk,t = 3 = 58 QU) is required. At the end of period t = 3, the
stock IkEnd,t = 3,h is empty. In the period t = 3, the order quantity is qk ,t = 3 = 120 QU. It is required to meet the demand in the period t = 4 . We remember
that only the order quantity for item k = 1 in period t = 1 (qk,t = 1 = 130 QU) is needed in the simulation model because we plan every Rk period.

Table C.11
Applying the solution algorithm with the help of the model parameter file 1-SPIM-CD-1Item-R1-L1-ClosingDay.dat and the inventory model file SPIM-CD-1.mod or SPIM-CD-2.mod.

t Start
Age-based Ikth E (Dkt ) = μkt + sskt qkt End
Age-based Ikth

1 80 QU of h = 2 ( x kh ) 120 + 0 = 120 of that 130 QU 32 QU of h = 2

80 QU of h = 0 ( ykh ) E (DktFIFO ) = 48 QU 8 QU of h = 0
E (DktLIFO ) = 72 QU

2 32 QU of h = 3 Store is closed 0 32 QU outdated

8 QU of h = 1 8 QU of h = 1

3 8 QU of h = 2 80 + 58 = 138 of that 0
130 QU of h = 0 ( ykh ) E (DktFIFO ) = 55 QU 120 QU
E (DktLIFO ) = 83 QU

4 120 QU of h = 0 ( ykh ) 120 + 0 = 120 of that 0 0

E (DktFIFO ) = 48 QU
E (DktLIFO ) = 72 QU

Appendix D. Calculation of costs in simulation scenarios

We assume that in scenarios with stores operating 6 days weekly, a store group has 26 open days and 4 closing days per month and that a month
has 30 days in mean. The average fixed order costs are c = 1294 MU in scenarios 6-CD-I-S, 6-CD-NI-S and 6-CD-NI-NS and c = 1129 MU in scenarios 7-
NoCD. The average purchasing costs per QU are equal in all scenarios (b = 60 MU/QU); the average inventory holding cost rate is a = 2 MU/QU,
where the stock level I t CD is considered each day (including closing days). The average waste cost rate is ψ = 73 MU/QU in all scenarios. The average
waste quantity w t CD is measured in each simulated period.
The total costs C for scenarios 6-CD-I-S and 6-CD-NI-S are calculated according to Eq. (D.1). One money unit (MU) is one cent. The total costs C
are specified in Euro, hence we divide the result by 100.
C = 1/30·( 26·(c + b·qt ) + 30·(a·I t CD ) + 30·(ψ·w t CD ) )/100
    
Order costs Inventory holding costs Waste costs (D.1)
The scenario 6-CD-NI-NS ignores Sundays, hence this scenario has no waste and no inventory costs on Sundays (Eq. (D.2)).
C = 1/30·(26·(c + b·qt ) + 26·(a·I t CD ) + 26·(ψ·w t CD ))/100 (D.2)
The scenario 7-NoCD has no closing days in grocery stores and we reorder every day. The total costs C for this scenario are calculated according
to Eq. (D.3).
C = (c + b·qt + a·It + ψ·wt )/100 (D.3)

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