Optimal replenishment policy for non-instantaneously perishable items with preservation technology and random deterioration start time

Abstract

This paper considers an inventory model for non-instantaneously deteriorating items with constant demand. The items start deteriorating at a constant rate after a random period of time from receiving the delivery by the retailer. The retailer can reduce the rate of deterioration by investing in preservation technology. Shortages in inventory are allowed and are partially backlogged, where the backlog rate depends on the waiting time up to the next replenishment. The objective is to determine the optimal inventory period, cycle length and investment amount in preservation technology. A few analytical results are derived to characterize the optimal solution. An algorithm is suggested to determine the optimal decisions numerically. The proposed model is also illustrated with two numerical examples.

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