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Profit Maximizing Probabilistic Inventory Model under Trade Credit

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  • Sarbjit Singh Oberoi

    (Institute of Management Technology, Nagpur, India)

Abstract

In the classical EOQ models it has been considered that demand is deterministic but in many practical situations it is not possible to have a fixed demand. This study discusses the more realistic overview of demand, as in realistic situation having dependent demand is difficult; it is possible only if you're supplying sub-assembly parts on contract basis. Therefore, this study considers stochastic demand. Here maximum demand is dependent on average yearly demand and prescribed demand function. Thus initial inventory level is taken to be maximum demand derived with the help of demand function and average demand. Demand pattern considered in this model was proposed by Naddor (1966) in his book inventory systems with various realistic factors. The realistic factors considered are selling price is always greater than cost price, permissible delay in payments and even the optimality of profit equation has been checked. This study proves by optimality conditions that the profit maximization equations derived in this model help to maximize profit

Suggested Citation

  • Sarbjit Singh Oberoi, 2017. "Profit Maximizing Probabilistic Inventory Model under Trade Credit," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 408-410.
    • Handle: RePEc:eco:journ1:2017-04-49
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    References listed on IDEAS

    as
    1. Teng, Jinn-Tsair & Chang, Chun-Tao & Goyal, Suresh Kumar, 2005. "Optimal pricing and ordering policy under permissible delay in payments," International Journal of Production Economics, Elsevier, vol. 97(2), pages 121-129, August.
    2. Goyal, Suresh Kumar & Teng, Jinn-Tsair & Chang, Chun-Tao, 2007. "Optimal ordering policies when the supplier provides a progressive interest scheme," European Journal of Operational Research, Elsevier, vol. 179(2), pages 404-413, June.
    3. Brander, Par & Leven, Erik & Segerstedt, Anders, 2005. "Lot sizes in a capacity constrained facility--a simulation study of stationary stochastic demand," International Journal of Production Economics, Elsevier, vol. 93(1), pages 375-386, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Probabilistic Demand; Trade Credit; Optimality; Convexity;
    All these keywords.

    JEL classification:

    • C - Mathematical and Quantitative Methods

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