ECONOMIC ORDER QUANTITY MODEL UNDER TRADE CREDIT AND CUSTOMER RETURNS FOR PRICE-SENSITIVE QUADRATIC DEMAND

Abstract

This article focuses on an inventory model in which a supplier gives credit for a prior mutually agreed fixed period to a retailer. In this model, the simultaneous determination of price and inventory replenishment when customers return product to the firm are given due importance. Price-sensitive quadratic demand is debated here; which is appropriate for the products for which demand increases initially and after sometime it starts to decrease. Lastly, retailer’s total profit is maximized with respect to selling price and cycle time. Numerical examples are given to authenticate the model. Through sensitivity analysis significant inventory parameters are filtered. Graphical outcomes, in two and three dimensions, are presented and managerial decisions are provided with multiple options.