A Two-Storage Inventory Model with Trade Credit Policy and Time-Varying Holding Cost under Quantity Discounts

Alaa Fouad Momena (), Rakibul Haque, Mostafijur Rahaman and Sankar Prasad Mondal
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Alaa Fouad Momena: Department of Industrial Engineering, College of Engineering, Prince Sattam Bin Abdulaziz University, Al Kharj 11942, Saudi Arabia
Rakibul Haque: Department of Applied Mathematics, Maulana Abul Kalam Azad University of Technology, West Bengal, Haringhata 741249, India
Mostafijur Rahaman: Department of Mathematics, Indian Institute of Engineering Science and Technology, Shibpur, Howrah 711103, India
Sankar Prasad Mondal: Department of Applied Mathematics, Maulana Abul Kalam Azad University of Technology, West Bengal, Haringhata 741249, India

Logistics, 2023, vol. 7, issue 4, 1-25

Abstract: Background: What are the cumulative influences of pricing, promotions of commodities, order size-based discount opportunities, and alternative warehousing scenarios on effective decision-making concerning inventory management? It is observed that the prices and promotion of products influence the demand rate. The shortage can be partially backlogged, and the backlogging rate depends on the waiting time. Also, discount and trade credit facilities may be available when purchasing items. This paper describes a novel inventory control model regarding optimal warehousing decision-making scenarios. Methods: This paper includes the facts in its hypothesis and examines the overall impact of the mentioned issues on profitability. The inventory carrying scheme associated with the proposed model consists of both rented and owned warehouse facilities in which the cost increases linearly with time. The numerical and visual simulation succeeds the mathematical approach to analyze the proposed inventory model in Mathematica software. Results: The results show that a price hike enhances profit despite the negative impact on demand creation. Also, promotion frequency favors profitability, suppressing the corresponding costs. Another managerial intuition is revealed through the numerical result that the stock should be held in a rented warehouse when deterioration in the owned warehouse increases, despite the cost of a rented warehouse. Conclusions: Besides several mentioned management insights, this study includes several existing models as particular cases and tackles challenges in the analytical optimization approach. This study leads toward the consequences of future research scopes with industry-based raw data.

Keywords: selling price; advertisement; EOQ model; price discount; time-dependent holding cost; warehouse; rented warehouse; partially backlogged shortage (search for similar items in EconPapers)
JEL-codes: L8 L80 L81 L86 L87 L9 L90 L91 L92 L93 L98 L99 M1 M10 M11 M16 M19 R4 R40 R41 R49 (search for similar items in EconPapers)
Date: 2023
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