FRESH PRODUCE INVENTORY FOR TIME-PRICE AND STOCK DEPENDENT DEMAND

Abstract

The market demand for fresh produce product is rising regularly in today’s health priority life. Basically, the demand for fresh produce products are also based on the measurement of freshness and the size of its shelf space for displaying the products which obviously fascinate more and more customers to purchase the product. Moreover, the expiration date and selling price for any deteriorating item plays a major role in the purchasing decision of a customer. Therefore, in this article, the market demand for fresh produce product is assumed to be a quadratic varying time function of its freshness, the selling price of item, the displayed stock in its shelf space and the expiration date. It may be gainful to preserve a high stock level at the end of the replenishment cycle, with this freshness-and-price-stock dependent demand. Therefore, varying the traditional way of zero ending inventory level to non-zero ending inventory is analyzed. So, the main objective of this article is to maximize the total profit by estimating the optimal selling price of the item, the optimal ending inventory level and the optimal replenishment cycle length, the optimal time to vacant the backroom and the optimal ordered quantity. The classical optimization technique is utilized for calculating the optimal values. Thereafter, using the concept of eigen-values of a Hessian matrix, we have proved the concave nature of the profit function. Finally, a numerical example along with the sensitivity analysis of decision variables by varying various inventory parameters are presented to validate the derived model and extracts significant managerial insights