Asymptotic Optimality of Base-Stock Policies for Perishable Inventory Systems

We consider periodic review perishable inventory systems with a fixed product lifetime. Unsatisfied demand can be either lost or backlogged. The objective is to minimize the long-run average holding, penalty, and outdating cost. optimal policy for these notoriously complex computationally intractable because of curse dimensionality. Hence, various heuristic replenishment policies are proposed in literature, including base-stock policy, which raises total level constant each period. Whereas studies show near-optimal numerical performances classic system zero lead time first-in-first-out issuance results on their theoretical very limited. In this paper, we first focus that simple asymptotically when any one lifetime, population size, unit penalty cost, cost becomes large; moreover, its optimality gap converges exponentially fast two parameters. then study important extensions. For under last-in-first-out even an arbitrary prove large costs, backlogging positive times, our continue hold sizes, costs. Finally, provide demonstrate systems. This paper was accepted by Victor Martinez de Albéniz, operations management. Funding: J. Bu partially supported Hong Kong Polytechnic University Start-up Fund New Recruits [Grant P0039585]. X. Gong Chinese (CUHK) Direct Grant 4057147] Research Grants Council (RGC) General CUHK14500120]. Supplemental Material: online appendix available at https://doi.org/10.1287/mnsc.2022.4400 .