Optimal replenishment policies for non-instantaneous deteriorating items with price and stock sensitive demand under permissible delay in payment

Abstract

This study is motivated by the paper of Chang et al. [International Journal of Production Economics 123 (2010) 62–68]. We extend their inventory model from two aspects. (1) The demand rate as multivariate function of price and level of inventory (2) Delay in payment is permissible. Under these assumptions, we first formulated a mathematical model and then some useful theoretical results have been derived to characterize the optimal solutions for non-zero and zero ending inventory system. Numerical examples are presented to illustrate the theoretical results. The sensitivity analysis of a suitable example is performed and some managerial insights are proposed. Our analysis revels that it is more beneficial to keep higher inventory level, hoping to stimulate more demand, even if it results in non-zero ending inventory.