The effect of inflation‐induced demand and trade credit on ordering policy of exponentially deteriorating and imperfect quality items

Abstract

Abstract This paper develops an inventory model for exponentially deteriorating and imperfect quality items when a trade credit is offered by the supplier. As it has been seen that the changing rates of inflation do not just have an effect on the ordered quantity but they also stimulate the demand for products, so this paper considers the combined effect of inflation, deterioration, imperfect quality and ‘ ’ trade credit policy on the economic ordering policy using a discounted cash flow (DCF) approach. In the study, mathematical models are derived under two different circumstances, i.e., Case I: When the discount offered by the supplier with a condition of making the payment by a specified period, M1 is accepted; and Case II: Discount is not taken and instead the payment is made by the end of the full credit period M (M > M1). Finally, a numerical example demonstrating the applicability of the proposed model has been included.

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