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A two-echelon inventory model with stock-dependent demand and variable holding cost for deteriorating items

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  • In this study, we develop an inventory model for deteriorating items with stock dependent demand rate. Shortages are allowed to this model and when stock on hand is zero, then the retailer offers a price discount to customers who are willing to back-order their demands. Here, the supplier as well as the retailer adopt the trade credit policy for their customers in order to promote the market competition. The retailer can earn revenue and interest after the customer pays for the amount of purchasing cost to the retailer until the end of the trade credit period offered by the supplier. Besides this, we consider variable holding cost due to increase the stock of deteriorating items. Thereafter, we present an easy analytical closed-form solution to find the optimal order quantity so that the total cost per unit time is minimized. The results are discussed with the help of numerical examples to validate the proposed model. A sensitivity analysis of the optimal solutions for the parameters is also provided in order to stabilize our model. The paper ends with a conclusion and an outlook to possible future studies.

    Mathematics Subject Classification: Primary: 90B05, 91B70; Secondary: 91B24.

    Citation:

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  • Figure 1.  Graphical representation of our proposed Inventory control model

    Figure 2.  Flowchart of the solution procedure

    Figure 3.  Graphical representation to show the convexity of total cost. The figure represents $T$, $t_1$ and the total cost $\Pi(T)$, along the x-axis, the y-axis and the z-axis, respectively

    Figure 4.  Graphical representation to show the convexity of total cost. The figure represents T, t1 and the total cost Π(T), along the x-axis, the y-axis and the z-axis, respectively

    Figure 5.  Change of total cost with respect to ordering cost, A, of our proposed model

    Figure 6.  Change of total cost with respect to parameter α of our proposed model

    Figure 7.  Change of total cost with respect to holding cost, h, of our proposed model

    Figure 8.  Change of total cost with respect to deteriorating cost, θ, of our proposed model

    Table 1.  Research works of various authors related to this area.

    Author(s)ShortagesTrade credit policyStock dependent demandPrice discount on backordersDeterio-rationsTime varying costs
    Ghare and Scharder (1963)
    Giri et al. (1996)
    Manna and Chaudhuri (2001)
    Roy (2008)
    Min et al. (2010)
    Mishra et al. (2013)
    Tripathi and Pandey (2013)
    Tripathi (2015)
    Annadurai and Uthayakumar (2015)
    Pervin et al. (2015)
    Swami et al. (2015)
    Our paper
     | Show Table
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    Table 2.  Sensitivity Analysis for different Parameters involved in Example 1.

    Parameter% changevalueTt1t2TC
    A+504503.98590.19780.1865225.4871
    +253753.97010.19750.1841225.4991
    +103303.96210.19680.1820225.5123
    -102703.95280.10420.1792225.5472
    -252253.95190.10400.1763225.5612
    -501503.94820.10370.1730225.5860
    s+50303.98830.10540.1579225.6102
    +25253.98650.10490.1556225.6372
    +10223.98510.10460.1534225.6819
    -10183.98400.10420.1518225.6960
    -25153.98320.10390.1475225.7542
    -50103.98180.10340.1455225.7620
    c+50903.98640.10430.1618226.0171
    +25753.98470.10390.1632226.1261
    +10663.98400.10440.1659226.4189
    -10543.98340.11030.1671226.4703
    -25453.98210.11110.1690226.5100
    -50303.98110.12350.1724226.5275
    a+501.054.08540.13520.1858225.8906
    +250.8753.99810.14320.1822225.8940
    +100.773.97020.16570.1805225.8976
    -100.633.94530.17230.1778225.9121
    -250.5253.93210.18050.1751225.9407
    -500.353.91610.18230.1736225.9522
    b+501.23.90930.18340.1780228.3131
    +251.03.9240.18740.1799228.4309
    +100.883.93980.19160.1827228.4971
    -100.723.9830.13960.1848228.5102
    -250.604.08060.16680.1864228.6524
    -500.403.15030.16250.1882228.7601
     | Show Table
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    Table 3.  Sensitivity Analysis for different Parameters which are involved in Example 1.

    Parameter% changevalueTt1t2TC
    M+500.453.93610.17900.1570227.1092
    +250.3753.94730.17960.1589227.4121
    +100.333.95280.18530.1603227.6708
    -100.273.95990.18540.1639227.8211
    -250.2253.96470.18610.1672227.8355
    -500.153.97200.18640.1700227.8708
    N+500.753.94710.15970.1968226.9858
    +250.6253.95100.15940.1940226.9987
    +100.553.95400.16590.1903227.6891
    -100.453.95930.16680.1881227.6988
    -250.3753.95490.16780.1854227.7408
    -500.253.96010.16820.1826227.1923
    θ+500.093.98400.16040.1725227.83
    +250.0753.98440.16290.1756227.71
    +100.0663.98470.16360.1791227.16
    -100.0543.98300.16460.1824226.88
    -250.0453.98710.16530.1847226.41
    -500.033.98890.16640.1879226.30
    δ+500.0753.98400.16870.1763225.74
    +250.06253.98440.16950.1735225.63
    +100.0553.98490.17360.1712225.16
    -100.0453.98500.17410.1675224.98
    -250.03753.98670.17500.1633224.47
    -500.0253.98930.17690.1600224.39
     | Show Table
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