The objective of this study is to develop a deteriorating inventory policy when the retailer invests on the preservation technology to reduce the rate of product deterioration. A solution procedure is presented to determine an optimal replenishment cycle, shortage period, order quantity and preservation technology cost such that the total profit per unit time is maximized. A numerical example and sensitivity analysis are presented to illustrate the model. (C) 2009 Elsevier B.V. All rights reserved.