An inventory model for defective items with trade credit and inflation

Abstract

This paper develops an inventory model with imperfect items under the effect of inflation and time value of money in which demand is a deterministic function of selling price and advertisement cost. In this process, a certain fraction of purchased items are defective. These non-conforming items are reworked or refunded if they reach the customer. In this article, the model is considered with finite replenishment rate under progressive payment scheme within the cycle time. Here, the retailer is allowed a trade credit offer by the supplier to buy more items. This model aids in minimizing the total inventory cost by finding the optimal cycle length, the optimal time length of replenishment, and the optimal order quantity. As a particular case, the results of the perfect system (i.e. the system without defective items) are obtained. The optimal solution of the model is illustrated with the help of numerical examples. Also, the effect of changes in the different parameters on the optimal total cost is graphically presented.