An integrated inventory model for time-varying demand: balancing trade credit, pricing, and sustainability under carbon tax policies

This study proposes an integrated inventory model for perishable items with time-varying demand, where demand depends on dynamic pricing and trade credit incentives. The framework addresses delayed deterioration - spoilage initiating after a predefined latency period, typical in products like seasonal produce or pharmaceuticals. To reconcile profitability and sustainability, the model integrates preservation technology investments to curb post-latency decay and carbon tax mechanisms penalising waste-driven emissions. It balances the trade-off between extended credit terms (boosting demand but increasing opportunity costs) and preservation costs (reducing waste but raising expenses). A profit-maximising function is formulated, validated numerically, and analysed for parameter sensitivity. Results demonstrate that synchronising pricing, credit periods, and preservation investments optimises profitability while ensuring regulatory compliance. The study provides actionable insights for designing inventory systems that harmonise financial efficiency with environmental stewardship under carbon taxation.