Two Level Trade Credit Policy Approach in Inventory Model with Expiration Rate and Stock Dependent Demand under Nonzero Inventory and Partial Backlogged Shortages

Abstract

In present real life situations, the stock and expiration date directly impact on the demand of an item. In this context, this research work develops an inventory model for stock and expiration rate-dependent demand under a two-level trade credit policy. Specifically, the following three situations are studied: (i) trade credit policy without zero ending inventory; (ii) trade credit policy with zero ending inventory; (iii) trade credit policy with partial backlogged shortages. The proposed inventory model is formulated as a non-linear constrained optimization problem. Some theoretical results are derived, and an algorithm is stated in order to solve the proposed inventory model. The main objective of the inventory model is to determine the optimal cycle length, the optimal ending inventory level, and the optimal number of units displayed which maximize the total profit. Some numerical examples are solved. Finally, a sensitivity analysis is done with the aim to see the impacts of a variation of the input parameters on the decision variables and the total profit.