Title: Optimal ordering policy with trade credit and variable deterioration for fixed lifetime products

Authors: Gour Chandra Mahata

Addresses: Department of Mathematics, Sitananda College, P.O. and P.S. – Nandigram, Dist. – Purba Medinipur, PIN – 721631, West Bengal, India

Abstract: In a supply chain, the supplier frequently offers the retailer a trade credit period, and the retailer in turn provides a trade credit period to her/his customer to stimulate sales and reduce stock inventory. Also, many products such as fruits, vegetables, high-tech products, pharmaceuticals, and volatile liquids not only deteriorate continuously due to evaporation, obsolescence and spoilage but also have their expiration dates. However, only a few researchers take the expiration date of a deteriorating item into consideration. This paper proposes an economic order quantity model for the retailer where: a) the supplier provides an up-stream trade credit and the retailer also offers a down-stream trade credit; b) deteriorating items not only deteriorate continuously but also have their expiration dates. We then show that the retailer's optimal cycle time not only exists but also is unique. Furthermore, we discuss several special cases including for non-deteriorating items. Finally, we run some numerical examples to illustrate the problem and provide managerial insights.

Keywords: economic order quantity; EOQ; inventory; deteriorating items; expiration dates; trade credit; optimal ordering policy; variable deterioration; fixed lifetime products; non-deteriorating items.

DOI: 10.1504/IJOR.2016.074756

International Journal of Operational Research, 2016 Vol.25 No.3, pp.307 - 326

Received: 20 Jan 2014
Accepted: 27 Feb 2014
Published online: 17 Feb 2016 *

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