Optimal ordering policy for short life-cycle products under credit financing with dynamic adoption in supply chain

Abstract

Traditional inventory models are mostly ignorant of the life cycle dynamics of a technology product; hence, they often fail to identify different dimensions of inventory research. This paper attempts to investigate the relationship between adoption behavior of customers using life cycle dynamics and associated trade credit policies in order to optimize the total inventory cost. The demand model used in this paper treats sales as a function of awareness diffusion and adoption. Awareness is considered as a function of feedback effects from users/customers. Retailer’s optimal strategies for short life cycle product under credit financing were determined analytically. Finally, numerical examples have been used to support the theoretical results. Theoretical results have further been used to gain some managerial insights.

Keywords:

• inventory
• stage-wise diffusion
• unfavorable information
• short life cycle
• trade credit

Acknowledgements

The authors are thankful to the two anonymous referees for their critical review of the earlier version of the paper. Authors are also thankful to the editor of the journal for his suggestions. This paper was revised in light of the comments. Authors are particularly thankful to BITS Pilani, Rajasthan, and FORE School of Management, New Delhi, for providing infrastructural support.

Disclosure statement

No potential conflict of interest was reported by the authors.