To prevent stock from expiring, the RightChain™ system monitors the total days of supply and compares it against strict time limits, called Shelf Life Constraints. When these limits are exceeded, the model initiates a hierarchical adjustment process to lower target inventory levels. Initial corrections involve shrinking production lots or increasing the frequency of deliveries to move goods faster. If these measures fail, RightChain™ Planning will reduce safety stock, even if it means lowering customer fill rates to remain within shelf life compliance. Despite these systematic interventions, certain scenarios may still result in a violation of shelf life constraints. The fundamental principle of the RightChain™ Planning optimization framework is that the total inventory on hand—comprised of various inventory components—must not exceed the shelf life of the SKU when expressed in inventory days on hand.

 

The Shelf-Life Constraint

The core objective of inventory optimization in this context is to ensure that the cumulative volume of all inventory types for a specific SKU does not exceed its usable lifespan. The sum of all inventory components (expressed in days on hand) must remain below or equal to the shelf life constraint. This constraint is measured in inventory days on hand. The components included in this calculation are Safety Stock Inventory (SSI), Lot Size Inventory (PLSI), Quarantine Stock Inventory (QSI), Anticipation Stock Inventory (ASI), and Moved Inventory Units (MIU). If the aggregate of these variables exceeds the Maximum Shelf Life (MSL), the planned target inventory levels must be systematically adjusted to bring the SKU’s inventory back into compliance.

 

SSI + PLSI + QSI + ASI + MIU < MSL

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Hierarchical Adjustment Protocol

When a shelf-life violation is identified, adjustments are made following a rigorous priority sequence. Each subsequent step is only taken if the preceding adjustment is insufficient to satisfy the constraint.

 

1. Reduce Production Lot Sizes

The primary lever for reducing inventory duration is the adjustment of production volumes. By decreasing the size of production lots, the organization minimizes the "lumpiness" of inventory arrivals and reduces the average inventory held at any given time.

 

2. Increase in Delivery Frequencies

If lot size reductions are inadequate to meet the shelf life constraint, the second tactical adjustment is to increase the frequency of deliveries. This strategy aims to spread inventory arrivals over more frequent intervals, thereby reducing the total volume sitting in storage and decreasing the days on hand.

 

3. Reduce Safety Stock and Fill Rate

The final and most critical adjustment involves the reduction of safety stock inventory (SSI). This stage represents a shift from operational efficiency to a potential impact on service levels. During this final phase, the system prioritizes the adjustment of network safety stock inventory. To meet the constraint, the framework mandates the reduction of fill rates, acknowledging that maintaining the shelf life constraint may necessitate a lower level of product availability.

 

Residual Risk

The implementation of the three-tiered adjustment process is designed to mitigate the risk of inventory expiration. However, the framework recognizes a critical limitation: even after all three adjustments have been applied, there remains a possibility that the shelf life constraint will not be satisfied. This indicates that in extreme cases, standard inventory optimization levers may be insufficient to align stock levels