An Inventory Model for Constant and Variable Deterioration Rate with Quadratic Demand under Trade Credit with Shortages
Sheetal Chabukswar, Santosh Gite
Abstract
In this article, we develop two inventory models for deteriorating items under a trade credit policy: one with a
constant deterioration rate and another with a time-dependent deterioration rate, both incorporating quadratic
demand and allowing for shortages. Managing inventory for deteriorating items is a significant challenge due to
their limited shelf life and variable market demand. The proposed models are motivated by real-life retail
situations and aim to attract more customers to buy products, thereby increasing total profit; thus, they provide
practical decision-making support. Optimal inventory levels and total profits are derived for each case, and a
comparative analysis is performed to evaluate the effects of deterioration rates under trade credit conditions. It
has been observed that Model II is generally better suited to dynamic demand scenarios. Under both trade credit
conditions, Model II consistently outperforms Model I. Furthermore, Model II facilitates higher profit growth as
the shortage penalty costs increase. Numerical examples and sensitivity analysis are performed to examine the
influence of the various decision-making parameters on the optimal solutions
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