Optimal Policies for Deteriorating Items with Maximum Lifetime and Two-Level Trade Credits

The retailer’s optimal policies are developed when the product has fixed lifetime and also the units in inventory are subject to deterioration at a constant rate. This study will be mainly applicable to pharmaceuticals, drugs, beverages, and dairy products, and so forth. To boost the demand, offering a credit period is considered as the promotional tool. The retailer passes credit period to the buyers which is received from the supplier. The objective is to maximize the total profit per unit time of the retailer with respect to optimal retail price of an item and purchase quantity during the optimal cycle time. The concavity of the total profit per unit time is exhibited using inventory parametric values. The sensitivity analysis is carried out to advise the decision maker to keep an eye on critical inventory parameters. 1. Introduction In business transactions, the offer of settling dues against the purchases without any interest charges from the supplier is attractive for the retailer. During this permissible delay period, the retailer can sell the item and generate the revenue and incur interest on it by depositing in the bank or financial firms. Goyal [1] developed a mathematical model to compute economic order quantity when delay in payments is permissible. The literature review by Shah et al. [2] gave up-to-date references on trade credit and inventory modeling. Sarkar et al. [3] developed an inventory model considering trade credit and price discount offer. Huang [4] established that the retailer is further beneficial if the credit period which is received from the supplier is passed onto the customers. The economic order quantity is computed when the supplier offers the retailer a credit period and the retailer passes a credit period to the customers with . This scenario is known as two-level trade credits. Huang [5, 6] extended the above model with floor constraint and finite replenishment rate, respectively. Teng and Chang [7] analyzed the two-level trade credit scenario by relaxing the assumption Pal et al. [8] analyzed three-stage trade credit policy in a three-layer supply chain. Another important parameter for inventory modeling is deterioration of items, namely, volatile and radioactive chemicals, medicines and drugs, fruits and vegetables, electronic gadgets, and so forth. Ghare and Schrader [9] gave first inventory model for exponentially decaying items. Shah et al. [10], Goyal and Giri [11], and Bakker et al. [12] collected articles on deteriorating inventory modeling. Le？niewski and Bartoszewicz [13] applied the control-theoretic