Deterioration Control Decision Support System for the Retailer during Availability of Trade Credit and Shortages

Abstract

The deterioration rate is a significant aspect of perishable goods. Since perishable items will always deteriorate, there are effective methods for reducing the rate of deterioration. Furthermore, in the existing inventory control literature, the deterioration rate is often viewed as an exogenous component. Keeping this problem in mind, this article develops the perishable inventory control system from the retailer’s perspective in which: (i) the deterioration rate is a controllable factor and suggests a new fresh quality technology (FQT) indicator, (ii) demand is determined by the perishable product’s quality, that is controlled by its rate of deterioration, (iii) the credit duration is predefined, and (iv) shortages are expected. The key goal is to demonstrate that there is an ideal quantity of the order that minimizes the retailer’s overall cost in terms of cycle time and deterioration rate. Finally, theoretical results are validated by solving two numerical illustrations and conducting a sensitivity analysis of the main factors resulting from the following managerial implications: (i) if the range of deterioration is between zero and one then the retailer should invest in the preservation factor to preserve the perishable product and if greater than one the retailer should not invest in the preservation factor, (ii) credit period significantly reduces the total cost. Hence, this trade credit strategy is more beneficial to the model.