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Annals of Operations Research

, Volume 248, Issue 1–2, pp 253–280 | Cite as

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

  • Chandra K. Jaggi
  • Sunil Tiwari
  • Satish K. Goel
Original Paper

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 

Notes

Acknowledgments

The authors would like to thank the Editor Endre Boros and anonymous referee for their valuable and constructive comments on earlier versions of our paper, which have led to a significant improvement in the manuscript. The first author acknowledges the support of the University Grants Commission through University of Delhi (Research Grant No. RC/2015/9677). The second author would like to thank University Grant Commission (UGC) for providing the Non-NET fellowship to accomplish this research.

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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Department of Operational Research, Faculty of Mathematical Sciences, New Academic BlockUniversity of DelhiDelhiIndia

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