Improved Preservation Technology for Non-Instantaneous Deteriorating Inventory Using Boundary Condition Estimation

Abstract

Various forms of preservation technology nowadays allow businesses to handle valuable perishable items with greater flexibility. Even with a wide variety of preservation techniques, the mathematical modelling of its implementation in EOQ literature remains rigid. The paper aims to integrate an improved preservation technology in a non-instantaneous deteriorating inventory model for businesses maximizing their average total cycle profit. The improved preservation technology furthers the delay to the time within the cycle where deterioration begins and enhances the durability of inventory that allows operators to employ a less prudent holding facility. Another improvement in this area is the accurate accumulation of preservation cost depending on the inventory level at hand. The conventional EOQ method of forming the objective function before choosing the optimal values for our two decision variables (Cycle time and level of preservation) is undertaken. The cycle time is split in two, differing in their inventory process (deterioration beginning in the second period). The time when deterioration begins is derived using the model's boundary conditions, a first attempt within the area. The optimal solution set is solved for a numerical example using an algorithm to demonstrate the model and prove the global nature of the solution. An investigation into the gains from the improved preservation technology is conducted by dissecting the effects within each individual component within the objective function. 3 separate channels by which this improved preservation technology modelling benefits the business model is found namely shifting to the higher profitable period, effects towards preservation affected costs and the returns to scale from successively increasing preservation levels. Sensitivity analysis is conducted to demonstrate and confirm the findings. The paper discovers great benefits from such an improved modelling that warrants further attention within the scope of preserved inventory models, especially on how levels of preservation could influence the traditional decision variable optimized such as cycle time or ordering frequency. Findings of the paper would have significant benefits to different inventory models with its own delay before deterioration and holding facility requirement.