Abstract
ABSTRACTFor perishable products, the seller usually asks for the buyer to prepay a fraction of the purchasing cost as a good-faith deposit, to pay some cash upon the receipt of the order, and then to offer a short-term interest-free loan (also known as permissible delay or trade credit) on the remaining purchasing cost. In addition, it is evident that the deterioration rate ages to 100% as the expiration date is approaching. In this paper, we incorporate the above two important and relevant facts to find the optimal cycle time and the fraction of no shortages such that the total profit is maximised. Several managerial insights are presented. For instance, an increase in expiration date (or fraction of credit payment) induces higher values of no-shortage fraction and total profit, while giving a lower value of replenishment cycle. In contrast, an increase in fraction of advance payment causes lower values of no-shortage fraction and total profit, but a higher value of replenishment cycle.
Published Version
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