Nita H. Shah

Retailer's pricing, credit and inventory policies for deteriorating items in response to temporary price/credit incentives

Abstract It is the purpose of this paper to model the retailers profit-maximizing retail promotion strategy, when confronted with a vendors trade promotion offer of credit and/or price discount on the purchase of regular or perishable merchandise. At issue is the determination of the three main elements of the retailers promotion strategy, namely (i) the size of the special order to be placed from the vendor, under the different types of possible trade incentives offered; (ii) the price and/or credit-terms incentives to be passed on to its own customers to stimulate demand on a temporary basis; and (iii) the quantity to be sold under these one-time-only conditions.

Probabilistic time-scheduling model for an exponentially decaying inventory when delays in payments are permissible

Abstract A probabilistic time-scheduling model is developed for an exponentially decaying inventory when the supplier offers some credit period T∗ for settling the accounts for the purchase quantity. The credit period T∗ is known constant. Mathematical models are derived for both the cases (i) T∗ ⩽ T and (ii) T∗ > T. Expressions are derived for the total average expected cost of the system, the optimum cycle time and the time for obtaining optimum order levels, S = S0, under each case. The model is illustrated in two particular forms.

Retailer's response to special sales: price discount vs. trade credit

Given the increasing saliency of special offers as a sales promotion tool, this paper analyses the advantages and disadvantages of the two most common payment reduction schemes, namely a decrease in the purchase price and a delay in the payment of the merchandise. Following some of the latest empirical evidence in the sales promotion field, the model includes a price-dependent demand, where price incorporates the ability of the retailer to pass on some of the savings to the customers. The integration of both the purchasing and the sale implications of the vendors offer on the retailers profit forms an integral part of the model. A numerical example highlights the main features of the model.

Inventory model for deteriorating items and time value of money for a finite time horizon under the permissible delay in payments

In this article, an inventory model is derived by assuming constant rate of deterioration of units in an inventory, time value of money under the conditions of permissible delay in payments. The optimal replenishments and fraction of cycle time are decision variables to minimize the present value of inventory cost over a finite planning horizon. The sensitivity analysis is carried out by a numerical example.

Retailer's decision for ordering and credit policies for deteriorating items when a supplier offers order-linked credit period or cash discount

In this study, the retailers decision for ordering and credit policies is analyzed when a supplier offers its retailer either a cash discount or a fixed credit period if the order quantity is greater than or equal to regular order policy. Then the retailer offers credit period to its customer which increases the demand and default risk and decreases profit. Furthermore, the units in the retailers inventory system deteriorate at a constant rate. Some theoretical results are derived to compute the optimal solution. The theoretical results are supported by numerical examples. The managerial acumens are provided.

A discrete-in-time probabilistic inventory model for deteriorating items under conditions of permissible delay in payments

An inventory model is developed for items that deteriorate continuously in time when demand is a random variable. It is assumed that the supplier allows delayed payment for settling the replenishment account. The model is continuous in units but discrete in time. A numerical example is given to illustrate the derived results

EOQ MODEL FOR TIME-DEPENDENT DETERIORATION RATE WITH A TEMPORARY PRICE DISCOUNT

Deterioration is defined as decay, damage, spoilage, evaporation, obsolescence, pilferage, and loss of utility or loss of marginal value of a commodity that reduces usefulness from original ones. Blood, fish, fruits and vegetables, alcohol, gasoline, radioactive chemicals, medicines, etc., lose their utility with respect to time. In this case, a discount price policy is implemented by the suppliers of these products to promote sales. In this study, a mathematical model is developed for an inventory system that considers a temporary price discount when commodities in an inventory system are subject to deterioration with respect to time. Our goal in this article is to maximize the difference between two costs (gain) — taking advantage of price discount by ordering a large quantity, which in turn increases inventory holding cost as well deterioration cost and by not ordering a large quantity at a discounted price. An attempt is made to find bounds on the beneficial discount rate. The model is supported with a numerical example.

PROBABILISTIC ORDER LEVEL SYSTEM WHEN ITEMS IN INVENTORY DETERIORATE AND DELAY IN PAYMENTS IS PERMISSIBLE

An order level inventory model is developed for deteriorating items with a constant rate of deterioration and vendor offering delay in payments. The model is developed under probabilistic demand. It is shown that the model derived can be related to the existing model for non-deteriorating items and when delay in payments is not permissible. The model is supported by a probability distribution function.

An Eoq Model For Progressive Payment Scheme Under Dcf Approach

An attempt is made to formulate optimal ordering policies for the retailer when the supplier offers progressive credit periods to settle the account. We define progressive credit periods as follows: If the retailer settles the outstanding amount by M, the supplier does not charge any interest. If the retailer pays after M but before N(M Ic1). The objective function to be optimized is considered as present value of all future cash-out-flows. An algorithm is given to find the flow of optimal ordering policy. Analytic proofs are discussed to study the effect of various parameters on an objective function.

Optimal production schedule in declining market for an imperfect production system

This is a study about economic production in an imperfect production system. The imperfect production system means is a system in which the machine shifts from an ‘in-control’ state to an ‘out-of-control’ state. This may happen at any random time during the production period. The classical economic production lot size model is based on the assumption that the produced items are of perfect quality. However, this is not observed during the production phase. In the long run, the process shifts from the ‘in-control’ state to the ‘out-of-control’ state after certain time due to continuous usage of the machine. The proposed model is developed to study the optimal production when a certain percent of total product is of imperfect quality. These items are reworked to maintain the quality of the products. The production cost per unit item is convex function of production rate. The demand is assumed to be decreasing function of time. The total cost of inventory system per time unit is minimized. The development of the model is validated by numerical examples and its sensitivity analysis is carried out too.