When considering perishable products, the trade-off between waste and shortage is important. A safety stock functions as a buffer for uncertainty in demand during a week, and will influence the amount of shortage and waste. The purpose of this study was to conduct research into the consequences of using a certain rule of thumb related to order policies for supermarkets facing non-stationary demand of a perishable product.
In this research, three rules of thumb for setting the order-up-to-level were tested and evaluated by simulation in Excel. The first rule, 1S1X, consists of a constant order-up-to-level that is not weekday dependent with one safety factor, as if demand is stationary. The second rule, 6S1X, considers six different order-up-to-levels for the different weekdays, optimised by one safety factor. The most extensive rule, 6S6X, also considers six order-up-to-levels, now optimised with weekday dependent safety factors.
The research shows that when the 6S6X rule is used for replenishment when facing non-stationary demand, the costs of shortage and waste were lowest for most experimental conditions. Surprisingly, having six order-up-to-levels optimised by one safety factor (6S1X-rule) is worse than a constant order-up-to-level.