Abstract
In this study, we develop an inventory model for deteriorating items with stock dependent demand rate. Shortages are allowed to this model and when stock on hand is zero, then the retailer offers a price discount to customers who are willing to back-order their demands. Here, the supplier as well as the retailer adopt the trade credit policy for their customers in order to promote the market competition. The retailer can earn revenue and interest after the customer pays for the amount of purchasing cost to the retailer until the end of the trade credit period offered by the supplier. Besides this, we consider variable holding cost due to increase the stock of deteriorating items. Thereafter, we present an easy analytical closed-form solution to find the optimal order quantity so that the total cost per unit time is minimized. The results are discussed with the help of numerical examples to validate the proposed model. A sensitivity analysis of the optimal solutions for the parameters is also provided in order to stabilize our model. The paper ends with a conclusion and an outlook to possible future studies.
Highlights
In the classical Economic Order Quantity (EOQ) model, it is assumed that the retailer must pay for items upon receiving them
Shortages are allowed for this model and, during stock out period, price discount on backorders are allowed for those customers who are willing to wait until the fulfillment of their demand
We can conclude that with the increase of purchasing cost, holding cost and shortage cost, the total average cost of the system increases; so to avoid increasing of total cost, we have to diminish the corresponding cost
Summary
In the classical Economic Order Quantity (EOQ) model, it is assumed that the retailer must pay for items upon receiving them. Stock-dependent demand, Variable holding cost, Tradecredit, Deterioration, Price discount on backorder, Optimization. We assume that the demand rate of an item be either time-dependent or constant. Tripathy and Pandey [30] introduced an inventory model for deteriorating items with Weibull distribution deterioration and time-dependent demand under trade credit policy.
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