Determining Optimal Lot Size, Reorder Point, and Quality Features for a Food Item in a Cold Warehouse: Data-Driven Optimization Approach

Abstract

We propose a nonlinear optimization model for determining the optimum lot size and reorder point for a food item distributed through a cold warehouse as well as the optimum quality features, namely temperature, humidity, packaging type, and level of environmental conditions. The item's quality is estimated based on the features mentioned earlier, and then it is used as a constraint in the optimization process. An assumption was made that the inventory is managed under a continuous review policy and the warehouse has limited space. The model seeks to minimize the annual total cost of managing the warehouse. The model will be a nonlinear mixed programming one, which is solved by Pyomo as a leading library in Python language programming. Numerical examples are used to demonstrate the use of the model and, through sensitivity analysis, develop insights into the operation of cold warehouses. This sensitive analysis opens the doors to managerial insight from which managers and policymakers can highly benefit.