This thesis presents studies on multi-product and multi-period in expired and shortage of perishable products replenishment quantity problem in Bahir Dar warehouse consumer products trade business unit in Ethiopia. Most approaches in the literature for optimizing decisions in such an environment consider only a single item inventory. This thesis presents a multi item inventory model to reduce replenishment product cost having an expiration date after which the product cannot be sold and products stock-out this leads to loss of sale. Proposed system dynamics methodology to improve replenishment quantity of expiry and stock-out products and saved the total operation cost such as loss of sale cost, expired cost, holding cost and ordering cost. From the simulation study using vensim software, we proposed improvement of 34.7 % replenishment quantity of expired products, 32.2% replenishment quantity of stock-out products and saved 1.2 million birr per year from the total cost inventory operation from existing system.