Inventory management for perishable products with a two-period shelf life when vendors face oversupply penalties and target the responsible buyers

In this study, a two-bin supply strategy is proposed in which products with a two-period shelf life are sold to two types of downstream buyers, addressing the supply chain challenge of exogenously imposed oversupply penalties faced by upstream vendors. Freshly replenished items are placed in the primary bin and sold to a responsible buyer. Surplus fresh items are allocated to the secondary bin, where both unsold fresh and aged items are sold to price-sensitive mainstream buyers under a FIFO issuing policy. Accordingly, we developed a profit-maximising dynamic programming model to investigate the structural properties of the vendor’s joint decisions on replenishment and mainstream-buyer demand-management. Numerical experiments were conducted to examine the interplay among responsible-buyer engagement, product shelf-life duration, and oversupply penalties on vendor profitability and wastage. The results demonstrated that the proposed two-bin supply strategy effectively controls disposal amount while simultaneously improving profitability.