An Inventory Model for Perishable Items with Price-, Stock-, and Time-Dependent Demand Rate considering Shelf-Life and Nonlinear Holding Costs

Abstract

Nowadays, consumers are more health conscious than before, and their demand of fresh items has intensely increased. In this context, an effective and efficient inventory management of the perishable items is needed in order to avoid the relevant losses due to their deterioration. Furthermore, the demand of products is influenced by several factors such as price, stock, and freshness state, among others. Hence, this research work develops an inventory model for perishable items, constrained by both physical and freshness condition degradations. The demand for perishable items is a multivariate function of price, current stock quantity, and freshness condition. Specific to price, six different price-dependent demand functions are used: linear, isoelastic, exponential, logit, logarithmic, and polynomial. By working with perishable items that eventually deteriorate, this inventory model also takes into consideration the expiration date, a salvage value, and the cost of deterioration. In addition, the holding cost is modelled as a quadratic function of time. The proposed inventory model jointly determines the optimal price, the replenishment cycle time, and the order quantity, which together result in maximum total profit per unit of time. The inventory model has a wide application since it can be implemented in several fields such as food goods (milk, vegetables, and meat), organisms, and ornamental flowers, among others. Some numerical examples are presented to illustrate the use of the inventory model. The results show that increasing the value of the shelf-life results in an increment in price, inventory cycle time, quantity ordered, and profits that are generated for all price demand functions. Finally, a sensitivity analysis is performed, and several managerial insights are provided.

A location-inventory model for the sustainable supply chain of perishable products based on pricing and replenishment decisions: A case study

“…Agrawal and Yadav [ 56 ] studied SCs that considered price-dependent demands to simultaneously define the production, inventory, and pricing decisions. Macias-Lopez et al [ 57 ] developed an inventory model where both the physical and freshness depreciations were constrained. The demand for perishable products is a multivariate function of freshness, current inventory level, and price.…”

Optimal Inventory Decisions for a Vendor With Perishable Items

“…This reason lead to lots of research in developing efficient models for profit maximization. In the quest to provide retailers with efficient decision making mechanism, [6] developed an inventory model for perishable items with price and stock-level dependent demand rate,taking into consideration the shelflife and a non-linear holding cost. Six different price dependent function where 45 tested on the model and showed that the profit function of the retailer business is concave meaning there is a unique Nathaniel Kayode Oladejo 1 , IJMCR Volume 11 Issue 01 January 2023…”

A Discount Technique-Based Inventory Management on Electronics Products Supply Chain

“…It capitalizes later by inventory researchers employing some realistic assumptions, for example, stock of products, discount policy, effects of time, and many other widely used attributes in the field of supply chain management. Sometimes a large inventory of products in any store can entice customers and produce higher demand than usual (Macías-López et al 2021;Chang et al 2010). In this direction, (Gupta and Vrat 1986) was the pioneer to explore the first inventory model with a stock-dependent demand rate.…”

“…As consumers are now more health-conscious than ever before, the demand for fresh items has increased sharply. Based on this concept, (Macías-López et al 2021) developed a model for perishable items that emphasizes customer demand with product quality over time. The demand here is considered with selling price and available stock dependent.…”