Title: Optimal ordering policy under two stage trade credits financing for deteriorating items using discounted cash flow approach

Authors: R.P. Tripathi

Addresses: Department of Mathematics, Graphic Era University, Dehradun (UK), India

Abstract: This paper develops an inventory model under two levels of trade credit policy by assuming the demand is a function of credit period offered by the retailer to the customers for deteriorating items using discounted cash flow (DCF) approach. Mathematical model is then developed to determine the optimal replenishment policy for the retailer. Next, we show that the total annual cost per unit time is a convex function of cycle time. We then provide an algorithm to find the optimal solution. We use numerical example to illustrate the algorithm. Finally, sensitivity analysis of the optimal solution with respect to the parameters of the system and some managerial implications are provided.

Keywords: deterioration; inventory management; credit-linked demand; credit period; discounted cash flow; DCF; two-level credit policy; optimal ordering policy; two stage trade credits; deteriorating items; inventory modelling; mathematical modelling; optimal replenishment policy.

DOI: 10.1504/IJPMB.2017.080942

International Journal of Process Management and Benchmarking, 2017 Vol.7 No.1, pp.120 - 140

Received: 15 May 2015
Accepted: 25 May 2015
Published online: 13 Dec 2016 *

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