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A deterministic inventory model for deteriorating items with two warehouses and trade credit in a supply chain system

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  • Liao, Jui-Jung
  • Chung, Kun-Jen
  • Huang, Kuo-Nan

Abstract

Chung and Huang (2007) designed recently a two-warehouse inventory model for deteriorating items when the supplier offers the retailer a delay period and in turn the retailer provides a delay period to their customers. They assumed that the stocks of RW are transported to OW via a continuous release pattern and the transportation costs are ignored. The holding cost in RW is exceeding that in OW. The deterioration rate of RW is assumed to be identical to that in OW. For practical purpose, it is observed that due to demand, the retailer needs to rent warehouse to store items sometimes. If the retailer's facility about deterioration is not newer than that of the rented warehouse, then α≥β. Otherwise, α<β. This paper extends the model of Chung and Huang (2007) by considering β>α which means that the rate of deterioration in RW exceeds that of OW. First, expressions are obtained for the total variable cost of the inventory system. Second, this study demonstrates that a unique optimal solution exists. Third, two lemmas and one theorem are designed for determining the optimal cycle time. Finally, numerical examples are presented to illustrate the procedure for solving the model and sensitivity analysis of the optimal solution with respect to the parameters of the system is conducted.

Suggested Citation

  • Liao, Jui-Jung & Chung, Kun-Jen & Huang, Kuo-Nan, 2013. "A deterministic inventory model for deteriorating items with two warehouses and trade credit in a supply chain system," International Journal of Production Economics, Elsevier, vol. 146(2), pages 557-565.
    • Handle: RePEc:eee:proeco:v:146:y:2013:i:2:p:557-565
    DOI: 10.1016/j.ijpe.2013.08.001
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    Cited by:

    1. Tiwari, Sunil & Jaggi, Chandra K. & Gupta, Mamta & Cárdenas-Barrón, Leopoldo Eduardo, 2018. "Optimal pricing and lot-sizing policy for supply chain system with deteriorating items under limited storage capacity," International Journal of Production Economics, Elsevier, vol. 200(C), pages 278-290.
    2. Janssen, Larissa & Claus, Thorsten & Sauer, Jürgen, 2016. "Literature review of deteriorating inventory models by key topics from 2012 to 2015," International Journal of Production Economics, Elsevier, vol. 182(C), pages 86-112.
    3. Chandan Mahato & Gour Chandra Mahata, 2023. "Sustainable partial backordering inventory model under linked-to-order credit policy and all-units discount with capacity constraint and carbon emissions," Flexible Services and Manufacturing Journal, Springer, vol. 35(3), pages 896-944, September.
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    5. Chandra K. Jaggi & Mamta Gupta & Amrina Kausar & Sunil Tiwari, 2019. "Inventory and credit decisions for deteriorating items with displayed stock dependent demand in two-echelon supply chain using Stackelberg and Nash equilibrium solution," Annals of Operations Research, Springer, vol. 274(1), pages 309-329, March.
    6. Reza Maihami & Behrooz Karimi & Seyyed Mohammad Taghi Fatemi Ghomi, 2017. "Effect of two-echelon trade credit on pricing-inventory policy of non-instantaneous deteriorating products with probabilistic demand and deterioration functions," Annals of Operations Research, Springer, vol. 257(1), pages 237-273, October.
    7. Ata Allah Taleizadeh & Nadia Pourmohammad-Zia & Ioannis Konstantaras, 2021. "Partial linked-to-order delayed payment and life time effects on decaying items ordering," Operational Research, Springer, vol. 21(3), pages 2077-2099, September.

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