An inventory model with imperfect items, stock dependent demand and permissible delay in payments under inflation

Abstract

This paper develops an economic ordering quantity (EOQ) model with stock dependent demand and imperfect items under the effect of inflation and time value of money. In this model, the lifetime of a defective item follows a Weibull distribution and the imperfect items are reworked at a cost to become the perfect one. In this article, the model is considered with finite replenishment rate under progressive payment scheme within the cycle time and the retailer is allowed a trade-credit offer by the supplier to buy more items. During the credit period, the retailer can earn more by selling their products. The interest on purchasing cost is charged for the delay of payment by the retailer. The objective of this model is to minimize the total inventory cost of the retailer by finding the optimal cycle length and the optimal order quantity. Numerical examples are given to demonstrate the results. Sensitivity analysis of the model with respect to several system parameters has been carried out and the implications are discussed in detail.