An Integrated Inventory Framework for Perishable Items under Age Dependent Deterioration and Demand under the Effect of Inflation

Abstract

This study develops an inventory model for perishable items incorporating the effects of age dependent deterioration and age and time dependent demand under effect of inflation. Unlike conventional inventory models that assume a constant or time dependent deterioration rate, the proposed model integrates the influence of the item’s age and the elapsed time since replenishment on the decay process. Demand is formulated as a function of time and age and deterioration as a function of product age to capture quality degradation in fruits and vegetables, pharmaceutical, and biological inventories. The proposed inventory model considers a finite planning horizon and assumes complete replenishment considering effect of inflation. Total cost components including holding cost, deterioration cost, ordering cost, purchasing cost and sales revenue are clearly formulated to determine the optimized replenishment model that minimizes the total inventory cost. The numerical results show that incorporating age dependent deterioration behavior significantly impacts optimal order quantity and cycle duration. The sensitivity analysis provides the impact of key parameters such as deterioration rate coefficients, demand pattern on the overall model. The model discussed in this paper provides a framework for the inventory management of perishable items and helps decision makers to design cost-effective and quality-sensitive replenishment strategies.