Title:
Information Sharing to Improve
Retail Product Freshness of Perishables (ed.2)
Information Sharing to Improve
Retail Product Freshness of Perishables (ed.2)
Author(s)
Ferguson, Mark E.
Ketzenberg, Michael E.
Ketzenberg, Michael E.
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Abstract
We explore the value of information (VOI) in the context of a retailer that provides a
perishable product to consumers and receives replenishment from a single supplier. We assume a
periodic review model with stochastic demand, lost sales, and order quantity restrictions. The
product lifetime is fixed and deterministic once received by the retailer, although the age of
replenished items provided by the supplier varies stochastically over time. Since the product is
perishable, any unsold inventory remaining after the lifetime elapses must be discarded
outdated). Without the supplier explicitly informing the retailer of the product age, the age
remains unknown until receipt. With information sharing, the retailer is informed of the product
age prior to placing an order and hence can utilize this information in its decision making. We
formulate the retailer's replenishment policies, with and without knowing the age of the product
upon receipt, and measure the VOI as the marginal improvement in profit that the retailer
achieves with information sharing, relative to the case when no information is shared. We
establish the importance of information sharing and identify the conditions under which
substantial benefits can be realized.
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Date Issued
2005-05-30
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306558 bytes
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Text
Resource Subtype
Working Paper