Variable holding cost Inventory model under the permissible delay in payments

Abstract

In competitive business environment, product demand is often positively influenced by the displayed stock level, which is why suppliers frequently allow retailers to delay payments. This study examines an inventory model that explores the favorable conditions where time-varying holding costs, permissible delays in payment, and multi-level demand prove advantageous for manufacturers and businesses. In the proposed decision model, during the allowable delay period, retailers are permitted to postpone payments for purchased products without incurring interest charges. This study focuses on analyzing the optimal replenishment policy for products that deteriorate gradually and have variable demand. The results, supported by a numerical example, demonstrate the model's effectiveness in maximizing profit and optimizing replenishment time. Additionally, a sensitivity analysis is conducted to further illustrate the model's practical applications.