Retailer’s ordering policies for time-varying deteriorating items with partial backlogging and permissible delay in payments in a two-warehouse environment

Abstract

With the convergence of innovation, technology, and supply chain, the world has been shrinking, and the retail industry is one of the largest spread across the globe in the past few decades. Consumer expectations are on priority for the retailers. Most of the retail sector deals with the items whose usefulness declines with time and reaches the expiration date, resulting in a decrease in sales and eventually diminishing revenues for the retailers. In such cases, effective replenishment decisions and ordering policies may yield a significant increase in revenues. Further, with emerging retail trends, providing trade credit is considered a price reduction tool and an alternative to price discounts. Motivated by this, an inventory model developed and analyzed for items exhibiting time-varying deterioration with partially backlogged shortages and permissible delay in payment in the two-warehouse environment. The primary objective is to obtain the optimal ordering and backlogging policies for the retailer by minimizing the relevant cost. The optimal solution is obtained, solved analytically, and the inventory model validated with the help of numerical illustrations. The sensitivity analysis of the optimal solution with respect to key parameters and the managerial implications are also provided. The model is applicable to perishable items such as baked products, fruits, vegetables, groceries, meat, and seafood, where the deterioration is time-dependent and is perceived by its expiration date.