Inventory model with expiration date of items and deterioration under two-level trade credit and preservation technology investment for time and price sensitive demand: DCF approach

Nita H. Shah, Urmila Chaudhari and Mrudul Y. Jani

International Journal of Logistics Systems and Management, 2017, vol. 27, issue 4, 420-437

Abstract: In this cut-throat competitive business world, cash-on-delivery is no longer a practice. Consequently, the retailer offers numerous short-term or long-term credit limits to the customer. The middle-layered player passes the offer of delay payment to the end users. In addition, most of the items have a fixed lifetime and deteriorate continuously, which cannot be sold after its expired dates. However, preservation technology investment can reduce deterioration rate of items in retailer's inventory system. In this paper, an inventory model is formulated when retailer offers partial credit, which he received from the supplier when demand is decreasing with time and price. The profit function is constructed using inflation rate and risk involved due to offer of credit period in generating revenue. The decision policies are analysed for the decision maker. Numerical examples are used to demonstrate the theoretical derivations. Sensitivity analysis is carried out for the advantageous scenario depending upon the lengths of the credit periods.

Keywords: inventory model; preservation technology investment; two-level trade credit; expiration date; DCF approach. (search for similar items in EconPapers)
Date: 2017
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