EOQ model for deteriorating item under full advance payment availing of discount when demand is price-sensitive

Abstract

Usually purchasing cost is to be paid instantly after the delivery time in classical EOQ model. But practically, retailer demands the customers for pre-payment of whole or a specific percentage of purchasing cost prior to delivery time. The purpose of this article is to develop the customer's inventory control models with time-price dependent demand by maximising average total profit of system for deteriorating items under the constraint of full pre-payment based on circumstances like: No shortages; full backordering shortages; partial lost sale; all with and without preservation. The article estimates optimum replenishment cycle, selling price, backordered quantity and preservation constant by classical optimisation technique. So, to validate derived models, numerical examples along with sensitivity analysis is undertaken, practically advising retailer to opt for pre-payment by offering discount to customer without shortages but with preservation technology scheme and then opting full prepayment with fully backordering with utilisation of preservation technology.