Sustainable inventory management based on environmental policies for the perishable products under first or last in and first out policy

Abstract

Holistic, quality, and sustainability-based inventory policy for perishable items may prove to be a game-changer amid great concern over the carbon footprint and global economic crises. In this paper, first-in-first-out (FIFO) and last-in-first-out (LIFO) dispatching policies have been used to examine the effect of quality on fresh products' sales mind the sustainability concern. The quality of these products worsens with age. Its deterioration rate follows two parameters, Weibull distribution, as it gives better flexibility for various items subjected to deterioration and demonstrates fitness for a range of shape and scale parameters. An adequate preservation effort such as controlled atmosphere (CA) storage and modified atmosphere packaging (MAP) techniques must be applied during storage and handling to maintain such products' quality. Consumers' purchasing behavior and curiosity towards quality and selling price drive these products' demand variability. The demand has been considered a function of quality and unit selling price of the item. The effect of inflation viz. time value of money has also been taken into account, affecting Authoritarian governments' norms on carbon emission control in taxation have also been considered essential for modern sustainable inventory policies. The present models determine the unit price and lot size for the maximum average profit of the system. The behaviors of models have been investigated using a comprehensive sensitivity analysis that offers important operative implications. It has been found that the first-in-first-out model is more profitable as compared to the last-in-first-out model, the price is very rigid, and little flexibility in price drastically decreases the profit. Backlogging has no impact on the selling price of products and order quantity but reduces the average yield because of carbon emission taxation.

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