Title: Economic order quantity model for two generation consecutive technology products under permissible delay in payments

Authors: Gaurav Nagpal; Udayan Chanda

Addresses: Department of Management, BITS Pilani, Pilani Campus, Pilani, 333031, Rajasthan, India ' Department of Management, BITS Pilani, Pilani Campus, Pilani, 333031, Rajasthan, India

Abstract: In this article, we discussed optimal replenishment policies for two succeeding generations' technology products under partial trade credit financing. It is often seen that in technology market, advanced generation product plays an important role in cannibalising the market of existing generation product. Thus, precise estimation of demand of technology generations' product is critical for taking any policy decisions. Demand estimation of technology products is a complex process, as the consumer buying behaviour of technology generational products is not only depends on marketing mix variables but also associated with the time-to-market phenomenon of new technologies. In technology market, interaction among users of different generational products controls the rate of substitution of older technology products with the new one. Therefore, due to the substitution nature of demand of multi-generation product, it is important to incorporate the interaction-substitution effect in replenishment policies for this kind of products. We used life cycle dynamics to project demand rates of technology generations. In this paper, we formulate the total cost function for five different situations depending upon the new generation introduction timing and length of the trade credit period. A detail sensitivity analysis is been performed to explore the efficacy of the model in a given situation.

Keywords: economic order quantity; EOQ; innovation diffusion; technological innovations; coefficient of innovation; coefficient of imitation; trade credits; successive generations.

DOI: 10.1504/IJPM.2021.112371

International Journal of Procurement Management, 2021 Vol.14 No.1, pp.93 - 125

Received: 09 Jul 2019
Accepted: 13 Oct 2019

Published online: 13 Jan 2021 *

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