Optimal Order Quantity for Risk-averse Vendors with Perishable Items
Fuseini Abdul-Razak Chinto
Department of Mathematics, School of Mathematical Sciences, CK Tedam University of Technology and Applied Sciences, Navrongo UE/R, Ghana.
Nathaniel Kayode Oladejo *
Department of Mathematics, School of Mathematical Sciences, CK Tedam University of Technology and Applied Sciences, Navrongo UE/R, Ghana.
*Author to whom correspondence should be addressed.
Abstract
Risk management plays a great role in the survival of retail business. In view of this, mathematical models that can aid the retailer to avoid unbearable losses are proposed in the paper. We apply the Conditional Value at Risk(CVaR) on retailer’s loss function to develop a model which will produce the order quantity that expose the risk-averse vendor to the least risk of loss. The risk-averse order quantity relates to the probability density function of the retail market.
Keywords: Optimal, risk-averse, perishable, inventory, retail, goodwill