Probabilistic EOQ model for deteriorating items under trade credit financing

Abstract

In this article, a probabilistic inventory model is developed for items that deteriorate at a constant rate and the demand is a random variable. It is also assumed that the supplier will offer a delay period to the retailer for payment and the retailer also extends the trade credit policy to his\her customer. Under these assumptions, we have constructed two separate models: one for discrete cycle time and another for continuous cycle time. To determine the global optimal ordering policies for both the models, we have developed and proved three separate theorems. Some already published results (for probabilistic inventory models) are special cases of our article. Finally, numerical examples are presented to demonstrate the developed models and the solution procedure.

Keywords:

• probability inventory
• random demand
• deterioration
• trade credit
• permissible delay in payments

Acknowledgements

The authors thank the anonymous referees for their valuable comments and suggestions that improved the quality of the paper to a great extent