Effects of a hybrid-price-stock dependent demand on the optimal solutions of a deteriorating inventory system and trade credit policy on re-manufactured product

Abstract

Abstract This study contributes to formulate a deteriorating inventory model with a hybrid-price-stock dependent demand with credit for units in stock period in the presence of trade credit policy by using the discounted cash flow approach on re-manufactured products. In real life, the demand function is not always constant or linear or nonlinear. The demand rate of any items goes up and down in the real market due to the sum of two different types of demand. This study observes that the demand is depending on price and stock of the product, time value of money and trade credit policy. The objective of this study is to find optimum cycle time, optimum selling price and present profit of all future cash flows. The model starts with mathematical formulating and thereafter studies the necessary and sufficient conditions for obtaining the unique optimal solution. The theoretical solution procedure and case examples have studied for validation of this model. Moreover, the sensitivity analysis is expressed out with respect to main parameters and managerial application is obtained. This study uses the different demand functions of a simple pricing-inventory system to find out the maximum profit on re-manufactured products.