An Inventory Model for Perishable Products with Stock-Dependent Demand and Trade Credit under Inflation

Abstract

We consider an inventory model for perishable products with stock-dependent demand under inflation. It is assumed that the supplier offers a credit period to the retailer, and the length of credit period is dependent on the order quantity. The retailer does not need to pay the purchasing cost until the end of credit period. If the revenue earned by the end of credit period is enough to pay the purchasing cost or there is budget, the balance is settled and the supplier does not charge any interest. Otherwise, the supplier charges interest for unpaid balance after credit period, and the interest and the remaining payments are made at the end of the replenishment cycle. The objective is to minimize the retailer's (net) present value of cost. We show that there is an optimal cycle length to minimize the present value of cost; furthermore, a solution procedure is given to find the optimal solution. Numerical experiments are provided to illustrate the proposed model.