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Lot-sizing decisions for deteriorating items with two warehouses under an order-size-dependent trade credit

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

Abstract

This study attempts to determine economic order quantity for deteriorating items with two-storage facilities (one is an owned warehouse and the other is a rented warehouse) where trade credit is linked to order quantity. As assumed herein, payment delays depend on the quantity ordered, when the order quantity is less than that at which a payment delay is permitted, the payment for the items must be made immediately. Otherwise, the fixed trade credit period is permitted. Furthermore, if the order quantity exceeds the owned warehouse capacity, it will be necessary to rent a warehouse which results in an additional rental cost. Otherwise, renting a warehouse is unnecessary. The problem discussed in this study involves how retailers decide whether to rent an additional warehouse to hold more items and thus obtain a trade credit period. First, a deterministic inventory model is developed for deteriorating items under the above situation. Second, this study demonstrates that the total cost function per unit time is convex via a rigorous proof. Third, five theorems are developed to optimize the replenishment cycle time and the order lot-size. Finally, numerical examples are used to illustrate these theorems and sensitivity analysis of the optimal solution with respect to the parameters of the system is carried out and some important managerial insights are obtained.

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  • Liao, Jui-Jung & Huang, Kuo-Nan & Chung, Kun-Jen, 2012. "Lot-sizing decisions for deteriorating items with two warehouses under an order-size-dependent trade credit," International Journal of Production Economics, Elsevier, vol. 137(1), pages 102-115.
    • Handle: RePEc:eee:proeco:v:137:y:2012:i:1:p:102-115
    DOI: 10.1016/j.ijpe.2012.01.020
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    1. 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.
    2. Bruno, Giuseppe & Genovese, Andrea & Piccolo, Carmela, 2014. "The capacitated Lot Sizing model: A powerful tool for logistics decision making," International Journal of Production Economics, Elsevier, vol. 155(C), pages 380-390.
    3. 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.
    4. Khan, Md. Al-Amin & Shaikh, Ali Akbar & Cárdenas-Barrón, Leopoldo Eduardo, 2021. "An inventory model under linked-to-order hybrid partial advance payment, partial credit policy, all-units discount and partial backlogging with capacity constraint," Omega, Elsevier, vol. 103(C).
    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. Sudip Adak & G. S. Mahapatra, 2021. "Effect of inspection and rework of probabilistic defective production on two-layer supply chain incorporating deterioration and reliability dependent demand," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 12(3), pages 565-578, June.
    7. Chung, Kun-Jen & Eduardo Cárdenas-Barrón, Leopoldo & Ting, Pin-Shou, 2014. "An inventory model with non-instantaneous receipt and exponentially deteriorating items for an integrated three layer supply chain system under two levels of trade credit," International Journal of Production Economics, Elsevier, vol. 155(C), pages 310-317.
    8. Xuan Qiu & Jasmine Siu Lee Lam, 2018. "The Value of Sharing Inland Transportation Services in a Dry Port System," Transportation Science, INFORMS, vol. 52(4), pages 835-849, August.
    9. Tsao, Yu-Chung, 2017. "Managing default risk under trade credit: Who should implement Big-Data analytics in supply chains?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 106(C), pages 276-293.
    10. Soni, Hardik N, 2013. "Optimal replenishment policies for non-instantaneous deteriorating items with price and stock sensitive demand under permissible delay in payment," International Journal of Production Economics, Elsevier, vol. 146(1), pages 259-268.
    11. Juanjuan Qin & Xiaojian Bai & Liangjie Xia, 2015. "Sustainable Trade Credit and Replenishment Policies under the Cap-And-Trade and Carbon Tax Regulations," Sustainability, MDPI, vol. 7(12), pages 1-22, December.
    12. Chandra K. Jaggi & Sunil Tiwari & Satish K. Goel, 2017. "Credit financing in economic ordering policies for non-instantaneous deteriorating items with price dependent demand and two storage facilities," Annals of Operations Research, Springer, vol. 248(1), pages 253-280, January.
    13. Yu-Chung Tsao & Qinhong Zhang & Hui-Ping Fang & Pei-Ling Lee, 2019. "Two-tiered pricing and ordering for non-instantaneous deteriorating items under trade credit," Operational Research, Springer, vol. 19(3), pages 833-852, September.
    14. Chen, Sheng-Chih & Teng, Jinn-Tsair & Skouri, Konstantina, 2014. "Economic production quantity models for deteriorating items with up-stream full trade credit and down-stream partial trade credit," International Journal of Production Economics, Elsevier, vol. 155(C), pages 302-309.
    15. Seifert, Daniel & Seifert, Ralf W. & Protopappa-Sieke, Margarita, 2013. "A review of trade credit literature: Opportunities for research in operations," European Journal of Operational Research, Elsevier, vol. 231(2), pages 245-256.
    16. 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.
    17. Chern, Maw-Sheng & Pan, Qinhua & Teng, Jinn-Tsair & Chan, Ya-Lan & Chen, Sheng-Chih, 2013. "Stackelberg solution in a vendor–buyer supply chain model with permissible delay in payments," International Journal of Production Economics, Elsevier, vol. 144(1), pages 397-404.
    18. Waqas Ahmed & Muhammad Jalees & Muhammad Omair & Zainab Mukhtar & Muhammad Imran, 2022. "An inventory management for global supply chain through reworking of defective items having positive inventory level under multi-trade-credit-period," Annals of Operations Research, Springer, vol. 315(1), pages 1-28, August.
    19. Beatrice Marchi & Lucio E. Zavanella & Simone Zanoni, 2023. "Supply chain finance for ameliorating and deteriorating products: a systematic literature review," Journal of Business Economics, Springer, vol. 93(3), pages 359-388, April.
    20. A. Thangam, 2017. "Retailer’s optimal replenishment policy in a two-echelon supply chain under two-part delay in payments and disruption in delivery," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 8(1), pages 26-46, January.
    21. Shayan Tavakoli & Ata Allah Taleizadeh, 2017. "An EOQ model for decaying item with full advanced payment and conditional discount," Annals of Operations Research, Springer, vol. 259(1), pages 415-436, December.
    22. Yajaira Cardona-Valdés & Samuel Nucamendi-Guillén & Rodrigo E. Peimbert-García & Gustavo Macedo-Barragán & Eduardo Díaz-Medina, 2020. "A New Formulation for the Capacitated Lot Sizing Problem with Batch Ordering Allowing Shortages," Mathematics, MDPI, vol. 8(6), pages 1-16, June.
    23. Ata Allah Taleizadeh & Shayan Tavakoli & Luis Augusto San-José, 2018. "A lot sizing model with advance payment and planned backordering," Annals of Operations Research, Springer, vol. 271(2), pages 1001-1022, December.
    24. Taleizadeh, Ata Allah, 2014. "An EOQ model with partial backordering and advance payments for an evaporating item," International Journal of Production Economics, Elsevier, vol. 155(C), pages 185-193.

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