INVENTORY MODEL FOR A NON-INSTANTANEOUS DETERIORATING ITEM WITH PRESERVATION TECHNOLOGY INVESTMENT, TRADE CREDIT AND PARTIAL BACKORDERING

Abstract

This research formulates an inventory optimization deterioration model for gradual degrading stock with demand varying dynamically in response to changing in time and price. Through the combined use of shelf-life extension technology, Credit facility financing, and Partial order backlog, the model provides holistic approach to optimizing inventory management. Preservation technology investment is analysed for its impact on reducing deterioration rates, thereby extending the shelf life of products. Trade credit terms are evaluated as a financial strategy to enhance cash flow and align payment cycles with revenue generation. Additionally, the model includes partial backordering to manage shortages effectively, balancing customer service levels with inventory costs. Analytical methods are employed to derive optimal policies for ordering, pricing, and backordering, aiming to maximize the overall profit. This study aims to explore how preservation technology and trade credit can reduce product deterioration and provide financial flexibility for retailers in perishable goods industries like food, pharmaceuticals, and electronics. This approach determines the Optimal pricing and preservation technology expenditure to achieve maximum profitability. Computational results and parameter variations are analysed for validation of the model