Optimal Investment in Preservation Technology for Variable Demand under Trade-Credit and Shortages
Abstract
:1. Introduction
- Time-varying holding cost
- Demand rate is the non-linear function of the sales price
- Preservation technology investment for preserve the deteriorating items
- One-layer trade credit policy
- Partially backlogged shortages accumulate at an exponential rate
2. Literature Review
3. Notation and Assumptions
3.1. Notation
Parameters | |
purchasing cost; (in $/unit) | |
holding cost; (in $/unit/unit time) | |
ordering cost; (in $/order) | |
price elasticity constant; | |
expiry dates of the product (in years) | |
μ | rate of preservation; |
upstream trade credit (in years) | |
vendor’s gained interest (percentage/year) | |
vendor’s lost interest (percentage/year) | |
backlogging parameter; | |
amount of back-ordered demand (units) | |
vendor’s order quantity (in units) | |
backlogging cost; (in $/unit time) | |
additional charge because of lost sales (in $/unit) | |
Decision variables | |
cycle time (in years) | |
selling price of an item (in $/unit) | |
investment for preservation technology (in $/unit) | |
Functions | |
; time-varying cost of holding, where the cost of holding increased by its (in $/unit/year) | |
; time is taken for inventory level to reach zero, where (in years) | |
level of inventory before the shortages; (units) | |
level of backordered; (units) | |
amount of a sales loss at a time (units) | |
vendor’s net profit function per unit time per scenario; (in $) |
3.2. Assumptions
- The inventory structure works with only a single product.
- The price-sensitive non-linear demand is the sales price function ; where the scaling direction is denoted by and the price elasticity constant is denoted by .
- The instant proportion of deterioration is specified by where is the expiry dates of an item and also . Moreover, as tends to infinity then tends to zero which provides the idea that the product is non-declining.
- The amount for the condensed rate of deterioration is given by and also supposed to be continuously increasing. In other words, , and without loss of generality, presume .
- A credit period of years is provided to its vendor by the supplier. The vendor will gain interest during the interval on sold items and, during the interval , will lose interest in unsold stocks.
- The portion of backlogged shortages symbolized by , which is a declining function and also differentiable with regard to time .
- For a negative inventory, an exponential partial backlogged sum is characterized as ; where indicates the parameter of backlogging with , a wait time until the further refilling.
- The inventory scheduling limit is endless.
- The refilling amount is unlimited with no lead time.
- During cycle time, there is not an alternative or restoration for the deteriorating item.
4. Mathematical Model
- Scenario-(i):
- Scenario-(ii):
- Ordering cost;
- Purchasing cost;
- Average holding cost;
- Preservation technology capital;
- Backlogging cost:
- Additional charge because of lost sales:
5. Computational Algorithm
6. Numerical Illustrations and Sensitivity Analysis
6.1. Numerical Illustrations
6.2. Sensitivity Analysis
- As the scaling demand rate rises, the investment , quantity , and net profit rise whereas the sales price and cycle time decrease. Thus, the increase is beneficial as it helps increase the net profit of the vendor. The rise is advantageous to this model as it aims to increase the net benefit of the vendor.
- As the price elasticity constant increases, the cycle time also increases whereas the sales price and net profit decrease. Moreover, as the values increase the order quantity and investment increases linearly then decrease slowly. Thus, the rise has a detrimental effect as it lowers the net benefit function.
- As the purchase cost increases, the sales price and cycle time increase whereas the investment , quantity , and net profit decrease. It is apparent that the rise in the sale price directly influences the demand rate and the decline in the overall profit feature. The rise is also not beneficial.
- As the increases, the quantity and cycle time also increase while the increases, the quantity , and cycle time decrease. However, the rise in ordering and holding costs is not preferable as the net profit function decreases.
- As the rate of preservation and maximum fixed lifespan increases, the cycle time also increases slowly.
- The backlogging parameter increases, the order quantity, cycle time, preservation technology investment, sales price, and net profit decreases. Thus, the increase shows a negative effect as the overall profit function decreases.
- As the credit period rises, the quantity and cycle time decrease whereas the net profit function increases. It suggests that if the credit time is longer, then the net profit is also higher.
7. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Author(s) | Sales Price Dependent Demand | Time-Dependent Holding Cost | Time-Dependent Deterioration | Preservation Technology Investment | Shortages | Trade-Credit |
---|---|---|---|---|---|---|
Abad [1] | √ | √ | ||||
Zhang et al. [3] | √ | √ | ||||
Shah et al. [4] | √ | √ | √ | |||
Tiwari et al. [5] | √ | √ | √ | |||
Ghare and Schrader [11] | √ | √ | √ | √ | ||
Kumar et al. [14] | √ | √ | ||||
Iqbal and Sarkar [18] | √ | √ | √ | |||
Dey et al. [25] | √ | √ | √ | |||
Ullah and Sarkar [27] | √ | √ | √ | |||
Chauhari et al. [28] | √ | √ | √ | |||
This paper | √ | √ | √ | √ | √ | √ |
Parameters | Values | Cycle Time (T) (Years) | Sales Price (S) ($) | Preservation ($) | Order (Units) | ($) |
---|---|---|---|---|---|---|
8000 | 0.870 | 35.58 | 3.48 | 46.80 | 1323.11 | |
9000 | 0.812 | 35.46 | 3.57 | 49.35 | 1494.86 | |
11,000 | 0.718 | 35.27 | 3.71 | 53.79 | 1839.51 | |
12,000 | 0.680 | 35.19 | 3.77 | 55.72 | 2012.27 | |
1.12 | 0.438 | 92.74 | 2.53 | 27.44 | 5152.01 | |
1.26 | 0.617 | 48.58 | 3.40 | 46.24 | 2843.97 | |
1.54 | 0.909 | 29.05 | 3.65 | 50.65 | 1007.20 | |
1.68 | 1.072 | 25.41 | 3.54 | 46.68 | 618.50 | |
8 | 0.709 | 28.26 | 3.67 | 65.82 | 1826.53 | |
9 | 0.737 | 31.81 | 3.65 | 57.96 | 1740.57 | |
11 | 0.785 | 38.91 | 3.63 | 46.53 | 1603.13 | |
12 | 0.805 | 42.47 | 3.62 | 42.26 | 1546.88 | |
32 | 0.659 | 35.17 | 3.36 | 45.06 | 1678.30 | |
36 | 0.712 | 35.26 | 3.51 | 48.49 | 1672.46 | |
44 | 0.809 | 35.44 | 3.77 | 54.66 | 1661.94 | |
48 | 0.853 | 35.53 | 3.88 | 57.47 | 1657.13 | |
0.24 | 0.771 | 35.32 | 3.67 | 52.38 | 1668.06 | |
0.27 | 0.767 | 35.33 | 3.66 | 52.02 | 1667.55 | |
0.33 | 0.757 | 35.37 | 3.63 | 51.33 | 1666.52 | |
0.36 | 0.753 | 35.39 | 3.62 | 50.99 | 1666.02 | |
0.096 | 0.762 | 35.35 | 3.64 | 51.70 | 1667.06 | |
0.108 | 0.762 | 35.35 | 3.64 | 51.69 | 1667.04 | |
0.132 | 0.762 | 35.35 | 3.64 | 51.66 | 1667.02 | |
0.144 | 0.762 | 35.36 | 3.64 | 51.64 | 1667.01 | |
1.6 | 0.758 | 35.37 | 3.95 | 51.44 | 1666.40 | |
1.8 | 0.760 | 35.36 | 3.78 | 51.56 | 1666.74 | |
2.2 | 0.763 | 35.35 | 3.51 | 51.77 | 1667.30 | |
2.4 | 0.765 | 35.35 | 3.40 | 51.86 | 1667.54 | |
3.2 | 0.757 | 35.37 | 4.03 | 51.38 | 1666.18 | |
3.6 | 0.760 | 35.36 | 3.82 | 51.54 | 1666.64 | |
4.4 | 0.764 | 35.35 | 3.49 | 51.79 | 1667.37 | |
4.8 | 0.765 | 35.35 | 3.35 | 51.90 | 1667.67 | |
0.4 | 0.786 | 35.40 | 3.71 | 53.32 | 1669.74 | |
0.45 | 0.774 | 35.38 | 3.67 | 52.47 | 1668.37 | |
0.55 | 0.751 | 35.34 | 3.61 | 50.92 | 1665.72 | |
0.6 | 0.740 | 35.32 | 3.58 | 50.19 | 1664.43 | |
0.4 | 0.763 | 35.35 | 3.64 | 51.74 | 1667.13 | |
0.45 | 0.762 | 35.35 | 3.64 | 51.70 | 1667.08 | |
0.55 | 0.761 | 35.36 | 3.64 | 51.64 | 1666.98 | |
0.6 | 0.761 | 35.36 | 3.64 | 51.61 | 1666.93 | |
0.48 | 0.762 | 35.35 | 3.64 | 51.71 | 1667.09 | |
0.54 | 0.762 | 35.35 | 3.64 | 51.69 | 1667.06 | |
0.66 | 0.762 | 35.36 | 3.64 | 51.65 | 1667.00 | |
0.72 | 0.762 | 35.39 | 3.64 | 51.63 | 1666.97 | |
0.24 | 0.796 | 35.65 | 3.72 | 53.33 | 1657.06 | |
0.27 | 0.780 | 35.50 | 3.68 | 52.57 | 1661.93 | |
0.33 | 0.742 | 35.21 | 3.60 | 50.64 | 1672.38 | |
0.36 | 0.720 | 35.06 | 3.54 | 49.44 | 1677.99 | |
0.08 | 0.789 | 35.49 | 3.71 | 53.25 | 1661.48 | |
0.09 | 0.776 | 35.42 | 3.68 | 52.47 | 1664.24 | |
0.11 | 0.748 | 35.29 | 3.61 | 50.86 | 1669.86 | |
0.12 | 0.734 | 35.22 | 3.57 | 50.03 | 1672.71 | |
0.096 | 0.791 | 35.35 | 3.72 | 53.68 | 1668.12 | |
0.108 | 0.776 | 35.36 | 3.68 | 52.64 | 1667.56 | |
0.132 | 0.749 | 35.38 | 3.60 | 50.78 | 1666.53 | |
0.144 | 0.737 | 35.38 | 3.57 | 49.96 | 1666.06 |
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Jani, M.Y.; Betheja, M.R.; Chaudhari, U.; Sarkar, B. Optimal Investment in Preservation Technology for Variable Demand under Trade-Credit and Shortages. Mathematics 2021, 9, 1301. https://doi.org/10.3390/math9111301
Jani MY, Betheja MR, Chaudhari U, Sarkar B. Optimal Investment in Preservation Technology for Variable Demand under Trade-Credit and Shortages. Mathematics. 2021; 9(11):1301. https://doi.org/10.3390/math9111301
Chicago/Turabian StyleJani, Mrudul Y., Manish R. Betheja, Urmila Chaudhari, and Biswajit Sarkar. 2021. "Optimal Investment in Preservation Technology for Variable Demand under Trade-Credit and Shortages" Mathematics 9, no. 11: 1301. https://doi.org/10.3390/math9111301
APA StyleJani, M. Y., Betheja, M. R., Chaudhari, U., & Sarkar, B. (2021). Optimal Investment in Preservation Technology for Variable Demand under Trade-Credit and Shortages. Mathematics, 9(11), 1301. https://doi.org/10.3390/math9111301