An EPQ Inventory Model with Allowable Shortages for Deteriorating Items under Trade Credit Policy

Abstract

This paper attempts to obtain the replenishment policy of a manufacturer under EPQ inventory model with backorder. It is assumed here that the manufacturer delays paying for the received goods from the supplier and the items start deteriorating as soon as they are being produced. Based on these assumptions, the manufacturer’s inventory model is formulated, and cuckoo search algorithm is applied then to find the replenishment time, order quantity, and selling price with the objective of maximizing the manufacturer’s total net profit. Besides, the traditional inventory system is shown as a special case of the proposed model in this paper, and numerical examples are given to demonstrate better performance of trade credit. These examples are also used to compare the results of cuckoo search algorithm with genetic algorithm and investigate the effects of the model parameters on its variables and net profit.

Reviewing the Literature of Inventory Models under Trade Credit Contact

“…EOQ Constant ------Teng and Lou [118] EOQ Credit dependent --✓ ---Dye [119] EOQ Price and time dependent ✓ ✓ ✓ ---Chung [120] Integrated Credit dependent --✓ ---Su [121] i n t e g r a t e d C o n s t a n t ✓ -----Thangam [122] E O Q C o n s t a n t -✓ ✓ ---Soni and Patel [123] Integrated Price dependent --✓ ---Zhong and Zhou [124] Noncooperative Constant ------Shah et al [125] Integrated Time and price dependent ---✓ --Guchhait et al [126] EOQ Stock and price dependent - [128] I n t e g r a t e d C o n s t a n t -✓ ----Liao et al [129] E O Q C o n s t a n t -✓ ----Yang and Chang [130] E O Q C o n s t a n t ✓ ✓ --✓ ✓ Feng et al [131] EPQ Constant --✓ ---Giri and Maiti [132] Integrated Price and credit dependent - [134] E O Q C o n s t a n t ✓ -----Yu [ [143] I n t e g r a t e d C o n s t a n t ✓ ✓ --✓ -Chiu et al [144] Integrated Price dependent ---✓ --Huang et al [145] EPQ Constant ------Ouyang et al [146] E O Q C o n s t a n t --✓ ✓ --Soni [147] EOQ Price and stock dependent -✓ --✓ -Shah et al [148] integrated Pricedependent ------Liao et al [149] E O Q C o n s t a n t -✓ --✓ -He and Huang [150] E O Q C r e d i t d e p e n d e n t -✓ ✓ ---Chuang et al [151] Integrated Constant ---✓ -- [153] E O Q C o n s t a n t ---✓ --Janková et al [154] EOQ Timedependent ------Singh and Sharma [155] EPQ Stock dependent -✓ ----Chung et al [156] E O Q C o n s t a n t -✓ -✓ -✓ Pal and Chandra [157] EOQ Stock dependent ✓ -----Tung et al [158] E O Q C o n s t a n t -✓ ----Wang et al [159] E O Q C r e d i t d e p e n d e n t -✓ ----Molamohamadi et al [160] EPQ Price dependent ✓ ✓ ----Bhunia et al [161] E...…”

“…Their study led to the conclusion that supplier-buyer collaboration results in extra profit gain. Molamohamadi et al [160] formulated an EPQ model of an exponentially deteriorating item with pricesensitive demand under trade credit, where shortages are considered. Moreover, they applied cuckoo search algorithm for solving the model and demonstrated the effectiveness of trade credit over the classical inventory system.…”

Line-of-Credit Payment Scheme and Its Impact on the Retailer’s Ordering Policy with Inventory-Level-Dependent Demand

“…Pal et al [9] investigated the optimal ordering policy and the optimal production rate under three-level trade credit of supplier-manufacturerretailer supply chain. Molamohamadi et al [10] obtained the replenishment decision of a manufacturer under the economic production quantity (EPQ) inventory model with backorder, assuming that the manufacturer delays paying for the received goods from the supplier and items start deteriorating as soon as they are being produced.…”

An Economic Order Quantity Model with Completely Backordering and Nondecreasing Demand under Two-Level Trade Credit

“…Having applied cuckoo search algorithm, Molamohamadi et al [23] solved an EPQ model of an exponentially deteriorating item with price-sensitive demand under trade credit contract and allowable shortages. Chern et al [24,25] formulated a supply chain under trade credit financing with noncooperative Stackelberg and Nash equilibrium solutions, respectively.…”