The effect of distinct collaborative inventory management strategies on the Minimum Life on Receipt (MLOR) rule

Purpose The Minimum Life on Receipt (MLOR) is a rule that specifies the maximum age a retailer is willing to accept a food product from a supplier. Retailers impose this rule to avoid the costs associated with product spoilage and to ensure that products meet high freshness standards. However, it places a burden on producers who have limited time to produce and ship products to retailers. Products that do not comply with the MLOR rule must be disposed of, creating waste for the supplier. Therefore, the supplier must find a balance between production efficiency, waste, and freshness delivered. In this work, we investigate the possibility of defining an optimal MLOR rule, i.e. a joint decision between a supplier and its retailers that maximizes the overall profits of the supply chain. Design/methodology/approach We compare the optimal MLOR rule, total profits, relative waste, and average freshness in two different collaborative inventory management strategies - Vendor-Managed Inventory (VMI, where all inventory is managed solely by the supplier) and Retailer-Managed Inventory (RMI, where each entity manages its own inventory). This comparison is conducted across different levels of demand uncertainty using a robust optimization approach. Findings Our results indicate that the VMI strategy allows better management of relative waste and induces a higher MLOR rule than the RMI strategy, regardless of the level of uncertainty. Originality/value This work compares, for the first time, the impact of jointly deciding the MLOR rule in two different collaborative inventory management systems.