Abstract
This paper studies the optimal ordering decision in the economic ordering quantity framework under two levels of trade credit policy where demand rate is a selling price dependent with ameliorating items whose value or utility or quantity increase over the time. In this paper, it is assumed that the retailer maintains a powerful decision-making right and can obtain the full trade credit offered by the supplier yet retailer just offers the partial trade credit to his/her customers. Furthermore, we consider that the items which were already sold but not yet paid for by customers would also incur interest charges or capital cost, which is not considered in the existing studies concerning retailer partial trade credit. For the objective function sufficient conditions for the existence and uniqueness of the optimal solution are provided. An efficient algorithm is designed to determine the optimal pricing and inventory policies for the retailer. Finally we obtain a lot of managerial insights from numerical examples. The results would provide valuable references for retailer in controlling the inventory of ameliorating items. The results also show that it is very necessary and realistic to consider the capital cost incurred by the items which were already sold but not yet paid for by customers under retailer partial trade credit policy.
Similar content being viewed by others
References
Aggarwal, S.P., Jaggi, C.K.: Ordering policies of deteriorating items under permissible delay in payments. J. Oper. Res. Soc. 46, 658–662 (1995)
Chung, K.J., Huang, Y.F.: The optimal cycle time for EPQ inventory model under permissible delay in payments. Int. J. Prod. Econ. 84, 307–318 (2003)
Chou, S.Y., Chouhuang, W.T., Lin, J.S.J., Chu, P.: An analytic solution approach for the economic order quantity model with Weibull ameliorating items. Math. Comput. Model. 48, 1868–1874 (2008)
Dye, C.Y., Ouyang, L.Y.: A particle swarm optimization for solving joint pricing and lot-sizing problem with fluctuating demand and trade credit financing. Comput. Ind. Eng. 60, 127–137 (2011)
Feng, H., Li, J., Zhao, D.: Retailer’s optimal replenishment and payment policies in the EPQ model under cash discount and two-level trade credit policy. Appl. Math. Model. 37, 3322–3339 (2013)
Goyal, S.K.: Economic order quantity under conditions of permissible delay in payments. J. Oper. Res. Soc. 36, 335–338 (1985)
Huang, Y.F.: Optimal retailer’s ordering policies in the EOQ model under trade credit financing. J. Oper. Res. Soc. 54, 1011–1015 (2003)
Huang, Y.F., Hsu, K.H.: An EOQ model under retailer partial trade credit policy in supply chain. Int. J. Prod. Econ. 112, 655–664 (2008)
Hwang, H.S.: A study on an inventory model for items with Weibull ameliorating. Comput. Ind. Eng. 33, 701–704 (1997)
Hwang, H.S.: A stochastic set-covering location model for both ameliorating and deteriorating items. Comput. Ind. Eng. 46, 313–319 (2004)
Jaggi, C.K., Goyal, S.K., Goel, S.K.: Retailer’s optimal replenishment decisions with credit-linked demand under permissible delay in payments. Eur. J. Oper. Res. 190, 130–135 (2008)
Kreng, V.B., Tan, S.J.: Optimal replenishment decision in an EPQ model with defective items under supply chain trade credit policy. Expert Syst. Appl. 38, 9888–9899 (2011)
Law, S.T., Wee, H.M: An integrated production-inventory model for ameliorating and deteriorating items taking account of time discounting. Math. Comput. Modell. 43, 673–685 (2006)
Liao, J.J.: An EOQ model with non-instantaneous receipt and exponentially deteriorating items under two-level trade credit policy. Int. J. Prod. Econ. 113, 852–861 (2008)
Mahata, G.C., Goswami, A.: An EOQ model for deteriorating items under trade credit financing in the fuzzy sense. Prod. Plan. Control 18(8), 681–692 (2007)
Mahata, G.C., Mahata, P.: Analysis of a fuzzy economic order quantity model for deteriorating items under retailer partial trade credit financing in a supply chain. Math. Comput. Modell. 53, 1621–1636 (2011)
Mahata, G.C.: An EPQ-based inventory model for exponentially deteriorating items under retailer partial trade credit policy in supply chain. Expert Syst. Appl. 39, 3537–3550 (2012)
Min, J., Zhou, Y.W., Zhao, J.: An inventory model for deteriorating items under stock-dependent demand and two-level trade credit. Appl. Math. Modell. 34, 3273–3285 (2010)
Mo, J., Chen, G., Fan, T., Mao, H.: Optimal ordering policies for perishable multi-item under stock-dependent demand and two-level trade credit. Appl. Math. Modell. 38, 2522–2532 (2014)
Moon, I., Giri, B.C., Ko, B.: Economic order quantity models for ameliorating/deteriorating items under inflation and time discounting. Eur. J. Oper. Res. 162, 773–785 (2005)
Mondal, B., Bhunia, A.K., Maiti, M.: An inventory system of ameliorating items for price dependent demand rate. Comput. Indust. Eng. 45, 443–456 (2003)
Musa, A., Sani, B.: Inventory ordering policies of delayed deteriorating items under permissible delay in payments. Int. J. Prod. Econ. 136, 75–83 (2012)
Sana, S.S.: Demand influenced by enterprises’ initiatives - a multi-item EOQ model of deteriorating and ameliorating items. Math. Comput. Modell. 52, 284–302 (2010)
Seifert, D., Seifert, R.W., Protopappa-Sieke, M.: A review of trade credit literature: opportunity for research in operations. Eur. J. Oper. Res. 231(2), 245–256 (2013)
Soni, H.N.: Optimal replenishment policies for deteriorating items with stock sensitive demand under two-level trade credit and limited capacity. Appl. Math. Modell. 37, 5887–5895 (2013)
Soni, H.N., Patel, K.A.: Optimal strategy for an integrated inventory system involving variable production and defective items under retailer partial trade credit policy. Decis. Support Syst. 54, 235–247 (2012)
Teng, J.T.: On the economic order quantity under conditions of permissible delay in payments. J. Oper. Res. Soc. 53, 915–918 (2002)
Teng, J.T.: Optimal ordering policies for a retailer who offers distinct trade credits to its good and bad credit customers. Int. J. Prod. Econ. 119, 415–423 (2009)
Teng, J.T., Goyal, S.K.: Optimal ordering policy for a retailer in a supply chain with up-stream and down-stream trade credits. J. Oper. Res. Soc. 58, 1252–1255 (2007)
Teng, J.T., Min, J., Pan, Q.: Economic order quantity model with trade credit financing for non-decreasing demand. Omega 40, 328–335 (2012)
Thangam, A., Uthayakumar, R.: Two-echelon trade credit financing for perishable items in a supply chain when demand depends on both selling price and credit period. Comput. Indust. Eng. 57, 773–786 (2009)
Tsao, Y.C., Sheen G.J.: A multi-item supply chain with credit periods and weight freight cost discounts. Int. J. Prod. Econ. 135, 106–115 (2012)
Acknowledgments
The authors wish to thank the anonymous referees for their valuable comments and suggestions that improved the quality of the paper to a great extent. This research work is fully supported by the University Grants Commission (UGC), INDIA, for providing a Minor Research Project (MRP, UGC) under the research Grant No. PSW - 204/13-14.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Mahata, G.C., De, S.K. An EOQ inventory system of ameliorating items for price dependent demand rate under retailer partial trade credit policy. OPSEARCH 53, 889–916 (2016). https://doi.org/10.1007/s12597-016-0252-y
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s12597-016-0252-y