An inventory model for slow moving items subject to obsolescence with limited customer patience

Finding a good strategy for dealing with a lower demand at a known future time is critical for the competitiveness of service providers. In this research slow-moving products that are subject to obsolescence are considered. Those products are controlled using a continuous inventory system with fixed lead times and the system is controlled using the one-for-one replenishment policy. Furthermore, limited customer patience is taken into consideration. The impact of the strategy in which service providers start adapting to the new base stock level before the drop in demand occurs on the total cost using natural attrition is analyzed for different situations. Using simulation and a simulation optimization technique for different instances, optimal times to start the removal process of the excess stock are proposed. Eventually this research concludes that the policy strategy results in significant cost reductions for both the cases with limited and unlimited customer patience.