Inventory Decisions for Imperfect Quality Deteriorating Items with Exponential Declining Demand Under Trade Credit and Partially Backlogged Shortages

Chandra K. Jaggi (), Prerna Gautam () and Aditi Khanna ()
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Chandra K. Jaggi: University of Delhi
Prerna Gautam: University of Delhi
Aditi Khanna: University of Delhi

A chapter in Quality, IT and Business Operations, 2018, pp 213-229 from Springer

Abstract: Abstract In the current time frame where excessive competition exists among various enterprises, the trade credit policy has been proven as a crucial instrument for monetary development among enterprises. The main advantage of using delay period is that it helps to have savings in the purchase as well as opportunity cost. Moreover, to surpass the extreme rivalry, companies have to construct an optimum strategy that increases their market value and maximizes their ultimate profit. In view of this, the production systems are built for smooth and continuous operation; however the possibility of discrepancy in production system cannot be removed entirely. As a result, each manufactured/procured lot may contain a portion of defective items that can differ from one process to another. Also, the condition is more vulnerable when the products are prone to deterioration. Nevertheless, by vigilant inspection process, the defectives can be separated from the perfect batch. Therefore, to include screening process is requisite as the market is entirely slanted toward customer. Thus, the present model is developed by keeping the above scenarios in mind. The formulated inventory model for a retailer examines the optimal shortage point and cycle length considering imperfect quality and deterioration with trade credit. Shortages are permitted and are backlogged partially. It is also considered that demand of a product has an exponential declining rate, and the rate of backlogging has an inverse relation with the waiting time interval for the subsequent replenishment. In addition, a numerical example is presented to exemplify the model, and further, the sensitivity analysis is carried out that provides essential decision-making implications.

Keywords: Inventory; Imperfect quality items; Trade credit; Deterioration; Partial backlogging; Exponential declining demand (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/978-981-10-5577-5_18

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