Abstract
This paper presents an EOQ model where demand is dependent upon time and selling price. In the proposed model of inventory, the retailer allows its unsatisfied customers to return their product whereas the manufacturer offers a full trade credit policy to the retailer. To make our model realistic, we have assumed that the product returned can be resold with the same selling price. Number of returns is a function of demand. In this proposed inventory model considering deterioration, the retailer does not fully reimburse its customers for the returned product. The primary purpose of this inventory model is to determine the optimal selling price, optimal order quantity, and optimal replenishment cycle length in order to maximize the retailer’s total profit earned per unit time. A numerical example is also presented and a sensitivity analysis is carried to highlight the findings of the suggested inventory model.
Highlights
Return policies are offered as an attractiveness pill to drag customers by the seller
An inventory model with a single item is developed for a single period under both return policy and trade credit policy
If we have a glance at the literature, plenty of works on inventory model considering deteriorating items have been done
Summary
Return policies are offered as an attractiveness pill to drag customers by the seller. Until now, no research work has been done in the past, which jointly analyzes the effect of return and trade credit terms on deteriorating items with resalable returns. In this paper, according to the best of author knowledge, first attempt has been made to fill this research gap by jointly analyzing the impact of both trade credit and return policy in the supply chain that contributes to the past literature. This paper studies a manufacturer – retailer – customer business relationship with the following features: (a) retailer is offered a full trade credit period by the manufacturer, (b) retailer offers a return policy to its buyer to generate sales, (c) demand is dependent upon selling price as well as time, (d) deterioration occurs, and (e) rate of return is observed to be dependent upon selling price as well as time.
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