A Periodic Review Inventory Model for Weibull Deteriorating Items under Trade Credit Offer Using Discounted Cash-Flow Approach

Abstract

The paper considers a periodic review inventory model for items having deterioration time distributed as two-parameter Weibull. The inventory manager is offered progressive trade credit whereby if the manager pays his dues within the first credit period, he does not have to pay any interest. However, he is charged an interest on the unpaid balance if he pays in the second credit period and the interest is increased if he pays beyond that period. The model is analyzed using the discounted-cash-flow approach, and the optimal stock height and cycle length are determined so as to minimize the present value of all future cash out-flows. Numerical examples are cited, and a sensitivity analysis is carried out to study how robust the model is to change in the parameter values.