Impact of Credit Financing on the Ordering Policy for Imperfect Quality Items With Learning and Shortages

Abstract

The paper develops an order quantity model with trade credit plus shortages under learning effects for deteriorating imperfect quality products. Generally, when the lot has imperfect items, the inspection of a lot is necessary to improve the quality of the lot. In this article, the seller provides a defective lot to his buyer under credit financing scheme, and after that buyer separates the whole lot under the screening process into two categories, one is defective and the other is non-defective items. The buyer sells out defective items at a low price as compared to non-defective items. It is assumed that customers' demand of good quality items is greater than the inspection rate for the whole lot to neglect the shortages situation. After keeping all points together, the buyer optimized his total profit concerning order quantity and shortage. A suitable numerical example and a sensitivity analysis have been provided for the validity of this model. The aim and utility of this paper have been presented in the conclusion section.