Optimal Investment in Preservation Technology for Variable Demand under Trade-Credit and Shortages

Mrudul Y. Jani, Manish R. Betheja, Urmila Chaudhari and Biswajit Sarkar
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Mrudul Y. Jani: Department of Applied Sciences, Faculty of Engineering and Technology, Parul University, Vadodara 391760, Gujarat, India
Manish R. Betheja: Department of Applied Sciences, Faculty of Engineering and Technology, Parul University, Vadodara 391760, Gujarat, India
Urmila Chaudhari: Government Polytechnic Dahod, Dahod 389151, Gujarat, India
Biswajit Sarkar: Department of Industrial Engineering, Yonsei University, 50 Yonsei-ro, Sinchon-dong, Seodaemun-gu, Seoul 03722, Korea

Mathematics, 2021, vol. 9, issue 11, 1-12

Abstract: In particular business transactions, the supplier usually provides an admissible delay in settlement to its vendor to encourage further sales. Additionally, the demand for the commodity is inversely proportional to the function of the sales price, which is non-linear and, in some situations, a holding cost rises over time. Moreover, many goods often deteriorate consistently and shall not be sold after their expiration dates. This study analyses a model for perishable products with a maximum life span with price-dependent demand and trade credit by assimilating these variations and under the supposition of time-varying holding cost. Furthermore, to diminish the rate of deterioration, investment for preservation technology is often taken into account beforehand. Based on real-life circumstances, shortages are admitted and backlogged partially, with an exponential rise in wait time before the new good emerges. The key ambition is to calculate the optimum investment under preservation, sales price, and cycle time using the classical optimization algorithm to maximize the vendor’s net profit. Additionally, to clarify the outcomes, the numerical illustrations are addressed, and the sensitivity analysis of significant parameters is eventually implemented.

Keywords: inventory; preservation technology; pricing; tme-varying perishable rate; economic order quantity; trade credit policy (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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