Optimizing Red Wine Inventory with Deterioration Control: A Two-Warehouse LIFO Dispatch Strategy

Abstract

This study presents a two-warehouse inventory model tailored for the red wine industry, addressing the challenges associated with perishable goods. The model incorporates the effects of inflation and operates under the Last In, First Out (LIFO) distribution policy. The objective is to minimize the total inventory cost, which includes storage costs and inflation-adjusted purchasing costs. The demand for red wine is assumed to be constant and known, with no shortages permitted. The inventory system consists of two warehouses, A and B, with predefined initial stock levels. Inventory balance equations govern stock levels, accounting for transfers between warehouses and customer demand. The LIFO policy determines the transfer quantities between warehouses, ensuring efficient stock management. Inflation is incorporated by adjusting the purchasing costs based on historical trends or other relevant economic factors. The model optimizes stock levels and transfer rates to achieve cost savings while maintaining uninterrupted supply. By providing a structured decision-making framework, this study offers valuable insights for inventory management in the red wine industry, considering both product deterioration and the economic impact of inflation.