Deterioration Item Inventory Policy with Sales Discount under Order Quantitiy Discount and Permissible Delay in Payments

Abstract

Most of the items sold at supermarkets have an expiration date. While many suppliers offer discounts and allow non-cash payments during certain time intervals. Supermarkets has the opportunity to take this offer so that profits can be increased, but they are faced with the nature of goods that have a shelf life. The greater the number of items stored, the greater the risk of expiration. Therefore, it is necessary to regulate the right inventory control policy so that the total costs incurred can be minimized. In this paper, it will be developed a multi-item inventory model of deteriorating item with sales discounts, all unit quantity discount from supplier and permissible delay in payments. The aim is to determine the right policy for controlling the inventory of items that have an expiration date in order to minimize losses and total inventory costs. This model is expected to help supermarkets in determining the optimal number of orders and when to place orders so as to minimize total inventory costs. The model solution is carried out with an optimization approach based on the parameters that affect the model. A numerical example is given at the end of this paper for model validation and illustrates the model solving algorithm.