Effects of inspection on retailer's ordering policy for deteriorating items with time-dependent demand under inflationary conditions

Abstract

In this article, an Economic Order Quantity (EOQ) model has been developed with unreliable supply, where each received lot may have random fraction of defective items with known distribution. Thus, the inspection of lot becomes essential in almost all the situations. Moreover, its role becomes more significant when the items are deteriorating in nature. It is assumed that defective items are salvaged as a single batch after the screening process. Further, it has been observed that the demand as well as price for certain consumer items increases linearly with time, especially under inflationary conditions. Owing to this fact, this article investigates the impact of defective items on retailer's ordering policy for deteriorating items under inflation when both demand and price vary with the passage of time. The proposed model optimises the order quantity by maximising the retailer's expected profit. Results are demonstrated with the help of a numerical example and the sensitivity analysis is also presented to provide managerial insights into practice.

Keywords:

• inventory
• deterioration
• inspection
• time-dependent demand
• inflation

Acknowledgements

The authors are grateful to the anonymous referees for their valuable suggestions and comments which helped immensely in improving the article. The first author would like to acknowledge the support of the Research Grant No.: Dean(R/R&D/2011/423), provided by the University of Delhi, Delhi, India for conducting this research.