An inventory model for deteriorating items under stock-dependent demand and two-level trade credit

Abstract

Previous inventory models under permissible delay in payments usually assumed that the demand of the items was either constant or merely dependent on the retailing price. This paper develops a lot-sizing model for deteriorating items with a current-stock-dependent demand and delay in payments. In the model, a retailer who purchases the items enjoys a fixed credit period offered by his/her supplier and, in turn, also offers a credit period to his/her customers in order to promote the market competition. We provide the necessary and sufficient conditions of the existence and uniqueness of the optimal solutions that could maximize the retailer’s average profit per unit time. Some properties of the optimal solutions are shown to find the optimal ordering policies of the considered problem. Numerical examples and sensitive analysis of the major parameters are presented to illustrate the developed model.