An EOQ model for deteriorating item with promotional effort and credit linked demand

Abstract

In the traditional supply chain models, it is observed that usually suppliers offer to the retailers a credit period and also the retailer to the customers to stimulate sales and reduce inventory. This practice of retailers increases the default risk of the percentage of customers not willing to pay back. In this paper, an inventory model has been developed under two levels of trade credit policy with customers' default risk consideration for a deteriorating item having a maximum lifetime. The supplier offers a partially permissible delay in payment per order and the retailer, in turn, provides a part of it to customers. Here, both demand and default risk are functions of the customer's trade credit period, whereas demand is also promotional effort sensitive. To mimic the changing market, the inventory costs are assumed to be imprecise. The models are illustrated numerically and some sensitivity analyses are presented. [Received: 13 January 2017; Revised: 14 September 2017; Revised: 10 June 2018; Accepted: 10 December 2018]