Dynamics inventory decisions in perishable supply chain considering sudden change in demand and risk attitude

Abstract

To elucidate the impact of decision-makers’ risk preferences on the perishable-goods supply chain system during demand fluctuations, this study utilizes prospect theory and system dynamics to develop a simulation model that incorporates decision-makers’ risk attitudes. By solving this model with different parameter settings, the Lyapunov exponent is obtained to determine the system’s stability domain under different scenarios. Retailer losses are evaluated using spoilage conversion rates and fresh product stockouts, shedding light on the relationship between system stability and retailer losses. The research aims to explore the optimal ordering strategy under demand fluctuations. The findings indicate that inappropriate inventory strategies, coupled with decision-makers’ risk attitudes, can lead to system oscillations and substantial losses. Conversely, an appropriate inventory strategy coupled with moderate risk aversion can help mitigate retailer losses.