An Inventory Model with Deteriorating Items, Considering the Impact of Inflation, Time-Variant Holding Costs, And Demand Rates That Vary Nonlinearly with Stock Levels

Abstract

Introduction: Deterioration has emerged as a significant concern in inventory management, and the impact of inflation cannot be overlooked, particularly over time. Inflation is responsible for the increasing rate of services and goods, and is also accountable for the purchasing power of money. This disequilibrium is characterised by a decline in purchasing power, which also has a ripple effect on holding costs, among other things. In the proposed plan, we investigate inflation's impact on an inventory model, incorporating linear holding cost with nonlinear stock-dependent demand, trade credit and partial backlogging of shortages. To demonstrate the inventory model's conclusions, numerical representations and sensitivity analysis are described, the results are discussed, and the key observations are highlighted. The numerical illustrations are performed with the help of MATHEMATICA 12.0.1. 

Objectives: The objective is to determine the best replenishment cycle and inventory levels that help maximize retailer profit within a given trade credit period.

Methods: The proposed study aims to investigate any retail business. When the inventory level becomes  units, a new cycle commences. An order quantity of units is required to replenish the stock, which restores the inventory level to  units at the start of the subsequent cycle. Furthermore, the supplier gives the retailer a trade credit period of M units. The inventory model's total profit per unit of time allows for shortages .

Results: The results provide practical insights for retailers to strengthen inventory management and minimize losses caused by inflation and product deterioration. The analysis further shows that higher inflation reduces overall profit, emphasizing the importance of including inflation in inventory planning. The findings also highlight that efficient use of trade credit, when aligned with the replenishment cycle, can significantly improve profitability. Future research could extend this model by incorporating multiple products, uncertain demand patterns, variable delivery times, and supply chain optimization.

Conclusions: The Proposed model examines how retailers can enhance their inventory replenishment strategies by considering important factors such as stock-dependent demand, holding costs, and trade credit provided by suppliers. The study also evaluates the role of inflation in managing perishable products, as well as the effects of shortages and partial backordering. The results provide practical insights for retailers to strengthen inventory management and minimize losses caused by inflation and product deterioration.