An Optimal Inventory Policy for Items having Linear Demand and Variable Deterioration Rate with Trade Credit

Abstract

Problem statement: Demand considered in most of the classical inventory models is constant, while in most of the practical cases the demand changes with time. In this study model has been framed to study the items whose demand changes with time and deterioration rate increases with time. The effect of permissible delay is also incorporated in this study. The objective of this research is to develop an inventory model for perishable items whose perish-ability rate as well as demand increases with time Approach: Firstly, problem is framed in the form of linear differential equation model and this model had been solved using general solution techniques of linear differential equations. The solution obtained gives the inventory level at any particular time of the cycle period. With the help of this inventory level, total as well as average inventory cost has been obtained. Results: This study developed a model to determine an optimal order quantity by using calculus technique of maxima and minima. Thus it helps retailer to decide its optimal ordering quantity under the constraints of variable deterioration rate and linear pattern of demand. Conclusion: Numerical solution of the suggested model had also been proposed, the above model can be converted into constant demand model, or for items having no deterioration. This study can further be extended for items having some other demand pattern, also time value of money and inflation can be incorporated in this model to make it more realistic and present business environment suited.