Inventory model for sustainable operations of fixed-life products: Role of trapezoidal demand and two-level trade credit financing

Abstract

Trade credit financing has emerged as an efficient tool for retailers due to its ability to attract more customers and increase demand for fixed-life products like fruit jam, sauce, air-cooler etc. This work proposes an inventory model to minimize retailers' total cost for fixed-life products following a time-dependent trapezoidal demand and two-level trade credit financing. Four cases are discussed based on different trade credit periods, and optimal solutions are analytically characterized through sustainable order quantity with complete backlogging of shortages. A numerical example is presented followed by a sensitivity analysis of the sustainability parameters to validate the impact of trade credit interactions on the retailer's overall cost. The model shows that a higher trade credit period to the retailer and a lower trade credit period from the retailer to the customer effectively reduces the retailer's total cost under certain specific cases. It generates evidence that the higher the trade credit period, the lesser the total cost under the optimal order quantity, and the higher the sustainability of the inventory system. This work has implications for retailers dealing with fixed-life products from various industries like dairy, grocery, processed fruits and vegetables to adopt sustainable inventory replenishment policies for their businesses.