Abstract
In the traditional economic order quantity (EOQ) model, it is assumed that the demand rate is constant. Thereafter, many researchers developed inventory model with time-varying demand to reflect sales in different phases of product life cycle in the market. However, in practice, especially for fashionable and high-tech product, the demand rate during the growth stages of its life cycle increases significantly with linear or exponential in the growth stage and then gradually stabilizes, and remains near constant in the maturity stage. It can be taken a ramp-type demand rate into account. Furthermore, in today’s supply chain, a supplier usually offers a permissible delay in payment to retailers to encourage them to buy more products, and a retailer in turn provides a downstream trade-credit period to its customers. Therefore, this paper focus on 1) ramp-type demand rate and 2) the upstream and downstream trade credit financing linked to order quantity for retailer is considered. The objective is to find the optimal replenishment cycle and order quantity to keep the total relevant cost per unit time as minimum as possible. The study shows that in each case discussed, the optimal solution not only exists but also is unique. Numerical examples are provided to illustrate the proposed model. Finally, some relevant managerial insights based on the results are characterized.
Highlights
In the traditional economic order quantity (EOQ) model, it is assumed that the demand rate is constant
The traditional inventory economic order quantity (EOQ) model assumes that a buyer must pay for items immediately after receiving them
Ting [33] provided some comments on the EOQ model for deteriorating items with conditional trade credit linked to order quantity
Summary
High-tech manufacturing is the backbone to the Taiwan economy. During the growth and maturity stages of a high-tech product life cycle, the demand rate increases significantly with linear or exponential in the growth stage and remains near constant in the maturity stage. The term “ramp type” is used to represent such a demand pattern. Wu [1] developed an EOQ inventory model for Weibull distribution deterioration items with ramp type demand rate and partial backlogging. Manna and Chaudhuri [2] developed an EOQ model with ramp type demand rate in which time dependent deterioration rate and shortages were considered. Agrawal et al [3] provided an inventory model with deteriorating items, ramp-type demand and partially backlogged shortages for a two-warehouse system. Other related research articles on this field can be found in Deng [4], Deng et al [5], Panda et al [6] [7], Skouri et al [8] [9] and their references
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