General Approach of Retailer Credit Period and Ordering Policy for Non-Instantaneous Deteriorating Items having Ramp-Type Demand Pattern

Abstract

In present times, deterioration rate has gained importance in inventory system in the field of business. The shelf life of certain commodities such as fruits, vegetables, food packages and even electronic products has a short span; so, such products have ramp-type demand pattern. To overcome the situation, certain steps, such as offering a period of credit on such items, are prevalent these days by the retailer but the flip side of the same is that this tendering of credit remains as a default risk period for the retailer. Thus, this article formulates an ordering policy in general for ramp-type demand for retailers. This policy is formulated with the support of fundamental concepts of calculus. Also, a non-instantaneous deterioration rate is assumed and shortages aren’t allowed. The main objective is to maximise the total profit of the retailer over the period of time and increase ordering quantity of the inventory system. The illustration of method is done by giving numeric examples and economic sensitivity analyses while keeping leading parameters in consideration.

Keywords: Inventory System, Non-Instantaneous Deteriorating Items, Credit Period, Ramp-Type Demand

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