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Optimal inventory policies for deteriorating items with trapezoidal-type demand patterns and maximum lifetimes under upstream and downstream trade credits

Author

Listed:
  • Jiang Wu

    (Southwestern University of Finance and Economics)

  • Jinn-Tsair Teng

    (William Paterson University of New Jersey)

  • Konstantina Skouri

    (University of Ioannina)

Abstract

In general, the demand rate moving through a product life cycle can be reasonably depicted by a trapezoidal-type pattern: it initially increases during the introduction and growth phases, then remains reasonably constant in the maturity phase, and finally decreases in the decline phase. It is evident that perishable products deteriorate continuously over time and can not be sold after its maximum lifetime. Thus, the deterioration rate of a product is increasing with time and closely related to its maximum lifetime. Furthermore, it has been hard to obtain loans from banks since the global financial meltdown in 2008. Hence, over 80% of firms in the United Kingdom and the United States sell their products on various short-term, interest-free loans (i.e., trade credit) to customers. To incorporate those important facts, we develop an inventory model by (1) assuming the demand pattern is trapezoidal, (2) extending the deterioration rate to 100% as its maximum lifetime is approaching, (3) using discounted cash-flow analysis to calculate all relevant costs considering the effects of upstream and downstream trade credits, and (4) including the costly purchase cost into the total cost, which is omitted in previous studies. Then, the order quantity that maximizes the present value of the profit is uniquely determined. Finally, through numerical examples, managerial insights are provided.

Suggested Citation

  • Jiang Wu & Jinn-Tsair Teng & Konstantina Skouri, 2018. "Optimal inventory policies for deteriorating items with trapezoidal-type demand patterns and maximum lifetimes under upstream and downstream trade credits," Annals of Operations Research, Springer, vol. 264(1), pages 459-476, May.
    • Handle: RePEc:spr:annopr:v:264:y:2018:i:1:d:10.1007_s10479-017-2673-2
    DOI: 10.1007/s10479-017-2673-2
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    References listed on IDEAS

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    Cited by:

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    5. Chang, Chun-Tao & Ouyang, Liang-Yuh & Teng, Jinn-Tsair & Lai, Kuei-Kuei & Cárdenas-Barrón, Leopoldo Eduardo, 2019. "Manufacturer's pricing and lot-sizing decisions for perishable goods under various payment terms by a discounted cash flow analysis," International Journal of Production Economics, Elsevier, vol. 218(C), pages 83-95.
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    9. 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.
    10. Wu, Yaobin & Wang, Yingying & Xu, Xun & Chen, Xiangfeng, 2019. "Collect payment early, late, or through a third party's reverse factoring in a supply chain," International Journal of Production Economics, Elsevier, vol. 218(C), pages 245-259.
    11. Ghiami, Yousef, 2023. "An analysis on production and inventory models with discounted cash-flows," Omega, Elsevier, vol. 117(C).
    12. Shi, Yan & Zhang, Zhiyong & Chen, Sheng-Chih & Cárdenas-Barrón, Leopoldo Eduardo & Skouri, Konstantina, 2020. "Optimal replenishment decisions for perishable products under cash, advance, and credit payments considering carbon tax regulations," International Journal of Production Economics, Elsevier, vol. 223(C).
    13. Yonit Barron, 2022. "A probabilistic approach to the stochastic fluid cash management balance problem," Annals of Operations Research, Springer, vol. 312(2), pages 607-645, May.
    14. Shi, Yan & Zhang, Zhiyong & Tiwari, Sunil & Yang, Lei, 2023. "Pricing and replenishment strategy for a perishable product under various payment schemes and cap-and-trade regulation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    15. Li, Ruihai & Yang, Hui-Ling & Shi, Yan & Teng, Jinn-Tsair & Lai, Kuei-Kuei, 2021. "EOQ-based pricing and customer credit decisions under general supplier payments," European Journal of Operational Research, Elsevier, vol. 289(2), pages 652-665.
    16. Chandan Mahato & Gour Chandra Mahata, 2021. "Optimal inventory policies for deteriorating items with expiration date and dynamic demand under two-level trade credit," OPSEARCH, Springer;Operational Research Society of India, vol. 58(4), pages 994-1017, December.
    17. Xie, Jiaping & Wei, Lihong & Zhu, Weijun & Zhang, Weisi, 2021. "Platform supply chain pricing and financing: Who benefits from e-commerce consumer credit?," International Journal of Production Economics, Elsevier, vol. 242(C).
    18. Ruihai Li & Jinn-Tsair Teng & Chun-Tao Chang, 2021. "Lot-sizing and pricing decisions for perishable products under three-echelon supply chains when demand depends on price and stock-age," Annals of Operations Research, Springer, vol. 307(1), pages 303-328, December.
    19. Ruihai Li & Jinn-Tsair Teng & Yingfei Zheng, 2019. "Optimal credit term, order quantity and selling price for perishable products when demand depends on selling price, expiration date, and credit period," Annals of Operations Research, Springer, vol. 280(1), pages 377-405, September.

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