A study on an inventory model for non-instantaneous deteriorating items with permissible delay in payments

Abstract

In this study, an appropriate inventory model for non-instantaneous deteriorating items with permissible delay in payments is considered. The purpose of this study is to find an optimal replenishment policy for minimizing the total relevant inventory cost. This mathematical model is a general framework that comprises numerous previous models such as in Ghare and Schrader [Ghare, P. M., & Schrader, G. H. (1963). A model for exponentially decaying inventory system. International Journal of Production Research, 21, 449-460], Goyal [Goyal, S. K. (1985). Economic order quantity under conditions of permissible delay in payments. Journal of the Operational Research Society, 36, 335-338], and Teng [Teng, J. T. (2002). On the economic order quantity under conditions of permissible delay in payments. Journal of the Operational Research Society, 53, 915-918] as special cases. We have developed some useful theorems to characterize the optimal solutions and provide an easy-to-use method to find the optimal replenishment cycle time and order quantity under various circumstances. Several numerical examples are given to test and verify the theoretical results. Finally, a sensitivity analysis of the optimal solution with respect to major parameters is also included. According to the results of numerical analysis, we provided several ways for the retailer to effectively reduce total annual relevant inventory cost.