In-store replenishment procedures for perishable inventory in a retail environment with handling costs and storage constraints

At grocery retailers, customers prefer to withdraw the newest instead of the older erishable products that are displayed on shelves. To reduce the substantial cost of outdating caused by this withdrawal behavior, we suggest a procedure that limits the number of batches on the shelf with the same product lifetime to one. The remaining inventory is stored in the backroom, where we assume to have ample storage capacity. We show that for products with large available shelf space, short product lifetimes, expensive outdating, and low handling cost this procedure leads to substantial cost reductions compared with in-store replenishment procedures that do not take into account the withdrawal behaviour of the customers and the storage capacity of the shelf.