Microsoft Word - Camera Ready Paper_ICOR_62_Nagare and Dutta_HongKong_ICOR'12

Abstract— Perishable inventory constitute a large portion of the world economy and include virtually all foodstuffs, pharmaceuticals, fashion goods, electronic items, periodicals, digital goods and many more as they lose value with time due to deterioration and/or obsolescence. Retailers dealing with perishable goods have to consider the factors of short shelf life and the dependency of sales volume on the amount of inventory displayed in determining optimal procurement policy. This paper presents an inventory model for continuously deteriorating goods having random shelf life and displayed inventory dependent demand. The model relaxes condition of zero stock at the end of cycle and maintains reserve stock to stimulate the demand. Under standard assumptions of single product, instantaneous replenishment with zero lead time, and constant deterioration rate; Economic Order Quantity (EOQ) is determined for maximizing profit. Computational results of numerical example suggest that profit decreases with reserve inventory; deterioration rate has pronounced impact on order quantity and profit as compared to inventory dependent demand factor. Sensitivity analysis of the model is also reported.