Imperfection with inspection policy and variable demand under trade-credit: A deteriorating inventory model

Abstract

A deteriorating inventory model with imperfect product and variable demand is formulated in this paper. A time-dependent deterioration factor is considered because the rate of deterioration is highly hinging on time. We introduce imperfect quality of production which leads to imperfect items in our proposed model. The retailer adopts inspection policy to pick over the perfect items from imperfect. Type I and Type II, both type of errors are included and the retailer invest some capital to improve the production process quality of the supplier. There is also a penalty cost for the retailer if they deliver some defective items by mistake. Sometime, there is a high amount of demand and, consequently, we assume shortages and partial backorder in our formulated model. The retailer adopts the trade-credit policy for his customers in order to promote market competition. The main objective of the paper is to show that the total cost is globally minimized and we have aimed at reducing the total cycle length, defectiveness of the system and the optimal order size by maximizing the total profit of the system. Then, we present three theorems and prove them to find an easy solution procedure to reduce the total cost of a system. The results are discussed with the help of numerical examples to approve the proposed model. A sensitivity analysis of the optimal solutions for the parameters is also provided. The paper ends with the conclusions and an outlook to possible future studies.