Determination of Continuous Deterioration Level due to Changing Demand Rates in Inventory

Abstract

A significant portion of the retail sector deals with products whose freshness deteriorates with time and lowers demand at the same price. Later, when it is normal to offer a discount to stimulate sales, the item may start to deteriorate. If chosen wisely, inventory management could have numerous advantages for the retailer.

The demand rates are changing with and without shortages of the products. This served as an inspiration for creating and analysing an inventory model in which the demand for a degrading product is first driven solely by its selling price and then by its level of freshness. For an inventory model with lost sales shortage, researchers consider general deterioration distribution and general demand function. It is demonstrated that net profit is a conditionally concave function of discount and a concave function of the period with positive inventory. Significant management insights gained from sensitivity analysis indicate that certain policies run opposed to those that merchants often implement, while others align with popular practices.

In this study, a brief introduction will be provided where the guidelines will be applied to manage inventory and keep up the quality of the products so that the demand rate is satisfied. The research will focus on the problems of the deterioration of Inventory with and without shortages and Different Demand rates. The chosen methodology will be a mixed approach with primary qualitative and secondary qualitative data analysis. The research finds out that meeting customer demand and maintaining product stock is possible by applying a quick functioning inventory control system. The research has also given recommendations on maximising the profit function and control inventories while keeping them at optimum level.