Inventory model for green products with payment strategy, selling price and green level dependent demand using teaching learning based optimization algorithm

Abstract

There has been a lot of research on pricing and lot-sizing practices for different payment methods; however, the majority has focused on the buyer’s perspective. While accepting buyers’ credit conditions positively impacts sales, requesting advance payments from purchasers tends to have a negative effect. Additionally, requiring a down payment has been found to generate interest revenue for the supplier without introducing default risk. However, extending the credit period, along with offering delayed payment options, has the potential to increase sales volume, albeit with an elevated risk of defaults. Taking these payment schemes into account, this study investigates and compares the per-unit profit for sellers across three distinct payment methods: advance payment, cash payment, and credit payment. The consumption rate of the product varies non-linearly not only with the time duration of different payment options but also with the price and the level of greenness of the product. The utmost objective of this work is to determine the optimal duration associated with payment schemes, selling price, green level, and replenishment period to maximize the seller’s profit. The Teaching Learning Based Optimization Algorithm (TLBOA) is applied to address and solve three numerical examples, each corresponding to a distinct scenario of the considered payment schemes. Sensitivity analyses confirm that the seller’s profit is markedly influenced by the environmental sustainability level of the product. Furthermore, the seller’s profitability is more significantly affected by the selling price index compared to the indices of the payment scheme duration and the green level in the demand structure.