Optimal inventory replenishment policies for deteriorating items with preservation technology under the effect of advertisement and price reliant demand

Abstract

In an ever-competitive business world, it becomes crucial for a company to sustain itself for its gradual growth and success. It is equally significant that losses due to deterioration in the case of variable demand are also controlled in a market filled with intensifying competition and technological advancement. To compensate, preservation technology investment (PTI) is viewed as a viable option for mitigating deterioration-related losses. The impact of advertising is also a pivotal factor for the product category being marketed. The present research, therefore, proposes to bridge this gap by suggesting a practical method to address preservation technology. The demand is considered to be sensitive towards price and advertisement. Further, to maximise the overall profit, this study performs joint optimisation of selling price, investment in preservation technology, and cycle length. Numerical examples and graphical representations are presented along with the sensitivity analysis to reveal the model's strength. As research tools, Solver and Mathematica are employed to perform the required analysis. The findings suggest the better performance of the developed model when compared with a traditional framework. The developed model applies to perishable produce whose effective management is crucial to satiate the demand of the customers and fetch profits for the organisation.