Optimal ordering policy and preservation technology for deteriorating items with maximum lifetime under a resilient hybrid payment decision

Abstract

<p style='text-indent:20px;'>This study demonstrates an inventory system with items changing value over time under various realistic environments. It is assumed that the time-varying deterioration rate depending on the maximum lifetime of items and the items exceeding the maximum lifetime are regarded as scarp and no longer serviceable. As a result, the retailer will invest in preservation technology to reduce the reckless deterioration. On the other hand, the retailer receives an upstream advance-cash-credit payment plan from the supplier while offering a downstream cash-credit payment plan to customers to stimulate sales. As above description, we incorporate the relevant phenomena into the proposed inventory model, then the primary objective is to determine the replenishment cycle time and the preservation technology which maximizes the retailer's total profit. Consequently, the contributions of this study have three parts as follows: (1) Addressing the economic (total profit) and technology (preservation technology) impacts simultaneously; (2) The propositions and theorems are derived along with a solution procedure; (3) It is proved that the optimal solution not only exists but also is unique under some conditions. Next, an algorithm is developed which simplifies the search for the sustainable optimal ordering strategies. Numerical examples and a sensitivity analysis are elaborated to validate the mathematical formulation. Findings are summarized and managerial implications are also discussed.</p>