Satish K. Goel

Retailer's optimal replenishment decisions with credit-linked demand under permissible delay in payments

Usually it is assumed that the supplier would offer a fixed credit period to the retailer but the retailer in turn would not offer any credit period to its customers, which is unrealistic, because in real practice retailer might offer a credit period to its customers in order to stimulate his own demand. Moreover, it is observed that credit period offered by the retailer to its customers has a positive impact on demand of an item but the impact of credit period on demand has received a very little attention by the researchers. To incorporate this phenomenon, we assume that demand is linked to credit period offered by the retailer to the customers. This paper incorporates the concept of credit-linked demand and develops a new inventory model under two levels of trade credit policy to reflect the real-life situations. An easy-to-use algorithm is developed to determine the optimal credit as well as replenishment policy jointly for the retailer. Finally, numerical example is presented to illustrate the theoretical results followed by the sensitivity of various parameters on the optimal solution.

Credit financing in economic ordering policies for defective items with allowable shortages

In the classical inventory models, the common unrealistic assumption is that all the items produced are of good quality in nature. However, in realistic environment, it can be observed that there may be some defective items in an ordered lot. These items are usually picked up during the screening process and are sold as a single lot at the end of screening process. Further, it is tacitly assumed that the supplier must be paid for the items as soon as the items are received. Whereas, in today business transaction, it is common to see that the retailer is allowed some grace period before they settle the account with the supplier. Under this scenario, a new inventory model for imperfect quality items has been developed under permissible delay in payments. Shortages are allowed and fully backlogged, which are eliminated during screening process as it has been assumed that screening rate is greater than the demand rate. This model jointly optimizes the order quantity and shortages by maximizing the expected total profit. Results have been validated with the help of numerical example using Matlab 7.0.1. Comprehensive sensitivity analysis has also been presented.

Credit financing in economic ordering policies for non-instantaneous deteriorating items with price dependent demand and two storage facilities

The formulation of classical deteriorating inventory models is done with the common unrealistic assumption that all the items start deteriorating as soon as they arrive in the warehouse. On the contrary, in a realistic environment, it has been observed that there are several items that do not deteriorate immediately. Items such as dry fruits, potatoes, yams and even some fruits and vegetables have a shelf life and deteriorate only after a time lag. Apart from this, in today’s competitive business world, the supplier usually offers a trade credit period to his retailers to attract more sales and the retailer considers it as an alternative to price discount. The present research proposes a two warehouse inventory model for non-instantaneous deteriorating items under trade credit based on the above phenomena, where the demand rate is assumed to be a function of the selling price. Further, shortages are completely backlogged and the interest on shortages at the beginning of the cycle has also been considered. The objective of the study is to determine the retailer’s optimal replenishment policies that maximize the average profit per unit time. Conclusively, a numerical example is presented to illustrate the applicability of the proposed model. Sensitivity analysis on key parameters is provided to reveal the managerial insights.

OPTIMAL REPLENISHMENT AND CREDIT POLICY IN EOQ MODEL UNDER TWO-LEVELS OF TRADE CREDIT POLICY WHEN DEMAND IS INFLUENCED BY CREDIT PERIOD

It has been observed that credit period has become a major concern for most of the retailers, because not only it has direct influence on inventory and finance but also on the demand of an item. Unfortunately, the impact of credit period on demand has received very little attention in the literature, whereas in reality length of the credit period offered has positive impact on the demand rate. The impact of credit period on demand may be instant or delayed. The aim of this paper is to determine the retailer’s optimal replenishment and credit policy in EOQ model under two-levels of trade credit policy when demand is influenced by credit period. These types of demand functions are observed in many consumer durables. Results have been illustrated with the help of a numerical example. Computational results provide some interesting policy implications.

Pricing and Replenishment Policies for Imperfect Quality Deteriorating Items Under Inflation and Permissible Delay in Payments

Usually it is assumed that all items in a lot are of good quality, but in reality this assumption may not always be pertinent. Thus, the inspection of lots becomes essential in almost all organizations. Moreover, its role becomes more vital when the items are deteriorating in nature. Owing to this fact, this paper investigates the impact of initial inspection on retailer’s pricing and ordering policy for deteriorating items under inflation and permissible delay in payments using discounted cash flow approach over a finite planning horizon. Demand rate is assumed to be a function of selling price. The proposed model jointly optimizes the number of replenishments and price by maximizing the retailer’s total profit. Results have been demonstrated with the help of a numerical example, and sensitivity analyses are also presented to provide managerial insights into practice.

Replenishment decisions under two-level credit policy for flexible credit linked demand

Trade credit affects the conduct of business significantly for many reasons. For the supplier who offers trade credit, it is an effective means of price discrimination as well as efficient method to stimulate the demand of his products. Trade credit in the form of permissible delay in payments has direct influence on inventory as well as on the demand of an item. Unfortunately, the influence of credit period on demand has received very little attention in the literature, whereas in reality, length of the offered credit period has positive influence on the demand rate which may be instant or delayed. Hence, to consider the flexible influence of trade credit on the demand of an item, a discrete logistic credit linked demand function has been developed which takes care of both the instant as well as delayed impact of the credit period on the demand rate. Based on the EOQ model, this paper analyses the problem of the retailer who has to decide his trade credit period and cycle length simultaneously under the two levels of trade credit policy. An example is given to illustrate the theoretical results. Computational results provide some interesting policy implications.