A sustainable inventory system with the advanced payment policy and trade-credit strategy for a two-warehouse inventory system

Abstract

Purpose This paper aims to consider a sustainable inventory model with price dependent demand, non-instantaneous deterioration rate, discount facility, partially backlogged shortages and advance and delay in payments for a two-warehouse system. Design/methodology/approach This model considered a non-instantaneous deterioration, which starts after a certain period with a constant rate. The deterioration rate in the rented warehouse is more compared to own warehouse. The proposed model focused on two things. The first one is to the benefits of the advance payments strategy and delayed payment for the retailer and supplier, where the two-warehouse system is available and the second one is using an appropriate discount facility on no of the installment to maximize the total profit. The classical optimization technique is used to solve the problem. Findings The combination of trade-credits and advance payments is initiated to provide more benefits to the retailer. The findings prove that advance payments, which are received from the retailer to the supplier are beneficial for the supplier, who can influence the demand increase because of higher lower selling prices. Decreasing the selling price is used as a catalyst to increase demand. It also extends the discount concept of Khan et al. (2019, 2019b). Research limitations/implications This model is limited by the fact that it does not consider variable deterioration. Therefore, the proposed inventory model could be extended by considering variable deterioration, as well as fully backlogged shortages and time-dependent demand function. Originality/value The study simultaneously considers a non-instantaneous deterioration inventory model, advance-payment, trade-credit for a sustainable two-warehouse inventory system. From the literature search to the best of knowledge no researcher has undergone this sort of study.