Optimal pricing and replenishment policies for instantaneous deteriorating items with backlogging and trade credit under inflation

Abstract

In this paper we develop an economic order quantity model to investigate the optimal replenishment policies for instantaneous deteriorating items under inflation and trade credit. Demand rate is a linear function of selling price and decreases negative exponentially with time over a finite planning horizon. Shortages are allowed and partially backlogged. Under these conditions, we model the retailer's inventory system as a profit maximization problem to determine the optimal selling price, optimal order quantity and optimal replenishment time. An easy-to-use algorithm is developed to determine the optimal replenishment policies for the retailer. We also provide optimal present value of profit when shortages are completely backlogged as a special case. Numerical examples are presented to illustrate the algorithm provided to obtain optimal profit. And we also obtain managerial implications from numerical examples to substantiate our model. The results show that there is an improvement in total profit from complete backlogging rather than the items being partially backlogged.

A reverse logistics chain mathematical model for a sustainable production system of perishable goods based on demand optimization

“…Therefore, Wang and Yue introduced a data mining food safety precautionary system for a sustainable supply chain (Wang and Yue 2017). Other aspects of deteriorating items have been studied by several researchers (Singh et al 2017;Sundara Rajan and Uthayakumar 2017;Uthayakumar and Tharani 2017).…”