Credit Policies for Deteriorating Imperfect Quality Items With Exponentially Increasing Demand and Partial Backlogging

Abstract

In retail industries every ordered lot carry some fraction of imperfect quality items which can vary depending upon production and handling conditions. The situation is even more subtle when the items are prone to deterioration. However, an inspection process can spare us from such a criticality by bifurcating the defectives from the good quality lot. Thus, a screening process is mandatory. In the hyper-competitive market, trade-credit is well-known gimmick in order to boost the sales. Keeping in view, an inventory scenario of a retailer is investigated who has to deal with imperfect and “deteriorating items” under “permissible delay in payments”. The demand is assumed to be increasing exponentially. Shortages are permitted to occur and supposed to be “partially backlogged.” Rate of backlogging is assumed to have inverse relation with the waiting time for the subsequent replenishment. In this chapter, shortage point and length of cycle are jointly optimized. Numerical analysis and sensitivity analysis is performed to provide important insights for managerial persistence.