Impact of trade credit and inflation on retailer's ordering policies for non-instantaneous deteriorating items in a two-warehouse environment

Abstract

With the advent of better technologies in manufacturing and retail industry, consumer beliefs and needs have been altered. Supermarkets are expected to sell fresh products in good conditions which have a longer shelf life, or do not begin to deteriorate immediately (termed known as non-instantaneous deteriorating items); this characteristic is now usually observed in almost all food stuffs, fashionable items, electronic products, among others. In order to sustain in the retail sectors, the managers are moving forward to store these items in warehouses. Moreover, due to increasing competition in business world, supplier offers a permissible delay in payments to retailer in order to increase demand. This encourages the retailer to order a large quantity, which in turn entitles the organization to rent out an additional storage space. Considering the importance of such a scenario, the present research work develops a two warehouse inventory model for non-instantaneous deteriorating items with permissible delay in payments under inflationary conditions. Shortages are allowed and partially backlogged, since customers’ willingness to wait decreases over time. The objective of this paper is to determine the retailer's optimal replenishment policies that maximize the present worth of total optimal profit per unit time. Finally, the proposed inventory model has been validated with the help of numerical example. Sensitivity analysis of the optimal solution with respect to key parameters of the inventory system has been also presented, which provides important managerial implications.