Optimal ordering policy for deteriorating items under down-stream trade credit dependent quadratic demand with full up-stream trade credit and partial down-stream trade credit

Abstract

Nowadays, the use of the offer of delay payment is a very impressive tool to boost the market demand by attracting more customers. In this paper, we propose an inventory model, in which a retailer receives a permissible delay on the entire purchase expanse from the manufacturer (i.e., an up-stream full trade credit). In comparison, the retailer asks customers to pay some percent of purchasing cost at the time of receiving the product to reduce default risk (i.e., a down-stream partial trade credit). We consider the product with maximum fixed-life time deterioration and to reduce deterioration of the product, seller spends capital on preservation technology to preserve the item. Here, down-stream trade credit dependent quadratic demand is debated which is suitable for the products whose demand increases initially and afterward it starts to decrease. Industries like fashion and electronics most probably deals with this type of demand. The objective is to minimise the total relevant cost of retailer with respect to cycle time, down-stream trade credit and investment for preservation technology. The model is supported with numerical examples. Sensitivity analysis is done to derive insights for decision-maker. Graphical results, in three dimensions, are exhibited with supervisory decisions.