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Credit financing in economic ordering policies for non-instantaneous deteriorating items with price dependent demand and two storage facilities

Chandra K. Jaggi (), Sunil Tiwari () and Satish K. Goel ()
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Chandra K. Jaggi: University of Delhi
Sunil Tiwari: University of Delhi
Satish K. Goel: University of Delhi

Annals of Operations Research, 2017, vol. 248, issue 1, 253-280

Abstract: Abstract The formulation of classical deteriorating inventory models is done with the common unrealistic assumption that all the items start deteriorating as soon as they arrive in the warehouse. On the contrary, in a realistic environment, it has been observed that there are several items that do not deteriorate immediately. Items such as dry fruits, potatoes, yams and even some fruits and vegetables have a shelf life and deteriorate only after a time lag. Apart from this, in today’s competitive business world, the supplier usually offers a trade credit period to his retailers to attract more sales and the retailer considers it as an alternative to price discount. The present research proposes a two warehouse inventory model for non-instantaneous deteriorating items under trade credit based on the above phenomena, where the demand rate is assumed to be a function of the selling price. Further, shortages are completely backlogged and the interest on shortages at the beginning of the cycle has also been considered. The objective of the study is to determine the retailer’s optimal replenishment policies that maximize the average profit per unit time. Conclusively, a numerical example is presented to illustrate the applicability of the proposed model. Sensitivity analysis on key parameters is provided to reveal the managerial insights.

Keywords: Inventory; Non-instantaneous deterioration; Two-warehouse; Permissible delay; Shortages (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:spr:annopr:v:248:y:2017:i:1:d:10.1007_s10479-016-2179-3