Flexible capacity rationing in consignment-selling cold warehouse

The escalating demand for fresh products presents significant challenges to contemporary cold chain management for retailers, especially with the capacity constraints of cold storage warehousing. Motivated by capacity management theories and practices, this article investigates a capacity allocation problem of a cold storage warehouse with consignment-selling. While a supplier (consignor) initiates a request to preposition products at a warehouse (consignee), the warehouse decides whether to accept or decline this request. Some requests require continuous refrigeration storage (type-C), and some others can be stored in less strict terminable conditions (type-T). However, the consignors prefer the stricter continuity refrigeration if possible. By making acceptance decisions upon request arrivals and implementing a flexible replacement strategy to substitute in-storage type-T items with high-priority type-C requests, we maximise the total profit, aligning with practical purposes. To this end, we build a Markov decision process (MDP) model to derive optimal admission thresholds. Furthermore, we solve a data-driven robust MDP model to accommodate the non-homogeneity caused by demand fluctuations. We theoretically derive the optimal dynamic base-stock policy and design an algorithm for the robust MDP. The results show significant benefits in practice, that the proposed solution approach outperforms the benchmark by an average of 17%.