A mathematical model to investigate the interactive effects of important economic factors on the behaviors of retailers

Cost management is a key step to the success of any logistics system and supply chain management. Inventory costs are an important part of logistics costs which are highly affected by economic factors such as demand growth rate (DGR), interest rate ([Formula: see text] ), and inflation rate ([Formula: see text] ). Analyzing the interactive effects of these economic factors plays a key role in preventing failures of logistics systems This study aims to develop a novel mathematical model and investigate the interactive effects of these factors on the behavior of retailers in Iran. To the best of our knowledge, this is the first time that the sale price is defined as a function of time and inflation rate where the demand rate is built up with a linear function of time. Different scenarios and sub-scenarios are then taken into consideration based on different combinations of factors and assumptions. As the main findings of the study, it is revealed that if [Formula: see text] or [Formula: see text] , holding costs are much higher than buying costs, and retailers are reluctant to invest in inventories. Given that DGR is independent of the inflation rate, and also if [Formula: see text] or [Formula: see text] , then DGR fluctuations have no impact on the total cost. Hence, in this case, buying costs are much higher than holding costs, and retailers are eager to invest in inventories instead of bank deposits. Furthermore, it is concluded that decision-makers can use the interest rate as leverage to set the probability of shortages and hoardings. Finally, some useful future research directions are discussed based on the main limitations of the study.