An EOQ model tor deteriorating items with progressive payment scheme under DCF approach

Abstract

In this paper, an EOQ model is developed in which items in inventory deteriorate at a constant rate and supplier offers the progressive trade credit to the retailer. A progressive trade credit is defined as follows: If the retailer pays the outstanding amount by M, the supplier does not charge any interest. If the retailer pays after M but before N (N >M), the retailer will have to pay interest charges at the rate I c1. If the account is settled after N, the retailer will be charged at the rate I c2 (Ic2 > Ic1). The model is developed under the Discounted-cash-flow (DCF) approach. The present value of all future cash-out-flows is derived for all the three possible scenarios. At the end, a numerical example is given to illustrate the results obtained and sensitivity analysis of various parameters on the optimal solutions is carried out.