A simulation-based approach for obtaining optimal order quantities of short-expiration date items at a retail store

The uncertain demand of expiration-dated item often leads to scrap losses or opportunity losses, which result in resource wasting and the degradation of customer satisfaction. In this paper, a well known exponential smoothing method was modified to forecast the hourly demand of rice balls, by utilizing the concept of the newsvendor problem, and a simulation model was constructed to simulate the scrap loss and opportunity loss changes. The optimal order quantity´s characteristics, which can maximize the retailer´s expected profit, were clarified by using OptQuest and sensitivity analysis. The proposed approach was applied to a real store to confirm its effectiveness.