Inventory ordering policies for mixed sale of products under inspection policy, multiple prepayment, partial trade credit, payments linked to order quantity and full backordering

Ata Allah Taleizadeh, Sara Tavassoli, Arijit Bhattacharya

Research output: Contribution to journalArticlepeer-review

14 Citations (Scopus)
5 Downloads (Pure)

Abstract

The situation where serviceable products are sold together with a proportion of deteriorating products to consumers is rarely discussed in the literature. This article proposes an inventory model with disparate inventory ordering policies under a situation where a portion of serviceable products and a portion of deteriorating products are sold together to consumers (i.e. mixed sales). The ordering policies consider a hybrid payment strategy with multiple prepayment and partial trade credit schemes linked to order quantity under situations where no inventory shortage is allowed and inventory shortage is allowed with full backorder. The hybrid payment policy offered by a supplier is introduced into the classical economic ordering quantity model to investigate the optimal inventory cycle and the fraction of demand that is filled from the deteriorating products under inspection policy. Further, a new solution method is proposed that identifies optimal annual total profit with mixed sales assuming no inventory shortage and inventory shortage with full backorder. The impact of an inspection policy is investigated on the optimality of the solution under hybrid payment strategies for the deteriorating products. The validation of the proposed model and its solution method is demonstrated through several numerical examples. The results indicate that the inventory model along with the solution method provide a powerful tool to the retail managers under real-world situations. Results demonstrate that it is essential for the managers to consider inclusion of an inspection policy in the mixed sales of products, as the inspection policy significantly increases the net annual profit.
Original languageEnglish
Pages (from-to)403–437
Number of pages35
JournalAnnals of Operations Research
Volume287
Issue number1
Early online date21 Sep 2019
DOIs
Publication statusPublished - Apr 2020

Keywords

  • Ordering policies
  • Multiple prepayments
  • Partial trade credit
  • Inspection policy
  • Linked to order quantity
  • Full backordering
  • UP-STREAM
  • SELLING PRICE
  • LOT-SIZING MODEL
  • TIME
  • ADVANCE PAYMENT
  • PRICE-DEPENDENT DEMAND
  • CONDITIONALLY PERMISSIBLE DELAY
  • EOQ MODEL
  • INFLATION
  • SUPPLY CHAIN

Cite this