Trade-credit modeling for deteriorating item inventory system with preservation technology under random planning horizon

Abstract

This paper deals with a stochastic deteriorating item inventory model with preservation technology and trade-credit finance. The planning horizon of many seasonal or fashionable items stochastically varies to some extent. On the other side, the demand of such items increases in initial phase followed by a constant. This type of demand pattern can be modeled as ramp-type demand. Deterioration of such products is a characteristic, which can be reduced by making the investment on latest equipment and technology. Consumption of such items within shelf life prevents to deterioration, which can be achieved by bulk sale. In order to stimulate the selling, trade-credit policy is also considered here. In these regards, this study examines the joint effect of preservation technology investment and trade-credit policy, wherein shortage is allowed and mixture of partial backlog and lost sales. Six cases may arise depending upon three parameters of time \(\mu \) (demand increases up to \(\mu \)), T (when on-hand inventory reaches to zero) and M (trade-credit period). The mathematical models are mainly categorized in two cases: (i) \(~\mu \le M\) and (ii) \(~\mu > M\). The model is illustrated through numerical experiments, sensitivity analysis, and graphical representation.