Patent Document ID: 8494916
Application ID: 13743023
Patent Flag: 1

Claim One:
1. A method for managing inventory freshness, comprising: receiving, by at least one processor, inventory status associated with a product having freshness shelf-life, the inventory status including inventory of the product classified into age classification; receiving, by said at least one processor, stochastic demand forecast associated with the product, the stochastic demand forecast including sales forecast and associated variance for each of the age classification of the product; receiving, by said at least one processor, cost information associated with the product, the cost information including a wholesale cost, a retail sale price, a salvage price and a holding cost associated with the product; maximizing, by said at least one processor, a stochastic dynamic programming formulation that takes as input the inventory status, the stochastic demand forecast and the cost information; and determining, by said at least one processor, order quantity and depletion quantity of the product per period based on said maximizing of the stochastic dynamic programming formulation; wherein the maximizing is based on at least a combination of a revenue from sales, a salvage value derived from depleting one or more units of aged product, procurement cost of acquiring fresh product, holding cost incurred by left over inventory, penalty cost incurred by lost sales, and a total discounted expected profit from one or more subsequent time periods, wherein the stochastic dynamic formulation includes control parameters of deplete-down-to level and order-up-to-level associated with the inventory, and the control parameters are obtained by recursively solving a sequence of concave maximization of the stochastic dynamic formulation.