Impact of credit financing, storage system and changing demand on investment for deteriorating items

In today's competitive business environment, managing deteriorating items inventories is a challenging task for many enterprises. Providing a credit scheme to the retailer would encourage larger order quantity which may require an additional warehouse (RW). Therefore, two-warehouse system with trade credit under inflationary conditions is developed, and shortages are partially backlogged. The demand rate is assumed to increase constantly at the initial stage and stabilises at the maturity phase when the product is established in the marketplace. This pattern of product demand is called the ramp type demand. In this paper, we analyse the impact of credit financing, storage system and demand variation on investment for deteriorating items. The objective of the study is to determine the optimal replenishment policy that minimises the present-worth of the total cost. The results have been validated with numerical examples. Sensitivity analysis is performed on major parameters and some significant insights are drawn. The practical applicability of the proposed model is discussed.