OPTIMAL INTEGRATED INVENTORY POLICY FOR STOCK-DEPENDENT DEMAND WHEN TRADE CREDIT IS LINKED TO ORDER QUANTITYOPTIMAL INTEGRATED INVENTORY POLICY FOR STOCK-DEPENDENT DEMAND WHEN TRADE CREDIT IS LINKED TO ORDER QUANTITY

Abstract

The classical EOQ model is developed under the assumption that buyer must settle the payment due immediately when units are received in the inventory system. To attract the buyers, the vendor uses promotional tool viz permissible delay period when the buyer’s order quantity is more than pre-specified quantity. In this paper, we analyze integrated inventory policy for vendor-buyer when demand is stock-dependent and trade credit is linked to order quantity. The joint total profit is maximized to determine buyer’s order quantity and the number of shipments from the vendor to the buyer during one cycle. Numerical examples and sensitivity analysis are given to find critical inventory parameters. Managerial insights are also obtained