A supply chain model for deteriorating items with time discounting under trade credit and quantity discounts

Abstract

A supply chain model for deteriorating items with price-dependent demand is developed under inflation, trade credit, and quantity discounts. We apply the discounted cash flow (DCF) approach for analysis of the retail price and replenishment problems over a finite planning horizon. In this paper, a mathematical model is derived under two different circumstances, that is, case I: the credit period is less than or equal to the cycle time for settling the account, and case II: the credit period is greater than the cycle time for settling the account. In addition, an optimal solution procedure is developed to find the optimal number of replenishment, cycle time, retail price and order quantity such that the total present value of profits is maximized. Finally, we provide several numerical examples to illustrate the results.