A Business Analytics Inventory Model for Ramp-Type Demand with Weibull Deterioration Rate—A Risk Management Approach

This paper introduces an inventory model for deteriorating items based on the Economic Order Quantity (EOQ) approach. The model considers a ramp-type demand pattern with a Weibull distribution deterioration rate, which is influenced by price and time to maximize retailers' profits. The focus is on perishable items with seasonal demand, such as fruits and vegetables, whose deterioration begins upon receipt into inventory. The model considers two parameters of the Weibull distribution, ‘g’ and ‘h’, which are dependent on time. The study aims to determine the optimal replenishment policies to maximize retailer profits while considering the effects of deterioration and mitigating unforeseen future risks. It offers practical guidance for retailers on inventory management decisions, including when and how many items to store through the proposed study. A comparison with existing studies demonstrates that a retailer can earn additional per unit profit through the proposed model. The model allows for partial backlogging of shortages until the next replenishment to boost the sale of perishable items. The study provides a Hessian matrix analysis, concavity theorems, and numerical examples to support its findings, followed by a sensitivity analysis to assess the impact of changes in decision variables and parameters and mitigate potential future risks.