Economic order quantities model for time-dependent deterioration rate with a temporary price discount

Deterioration is defined as decay, damage, spoilage, evaporation, obsolescence, pilferage, and loss of utility or loss of marginal value of a commodity that reduces usefulness from original ones. Blood, fish, fruits and vegetables, alcohol, gasoline, radioactive chemicals, medicines, etc., lose their utility with respect to time. In this case, a discount price policy is implemented by the suppliers of these products to promote sales. In this study, a mathematical model is developed for an inventory system that considers a temporary price discount when commodities in an inventory system are subject to deterioration with respect to time. Our goal in this article is to maximize the difference between two costs (gain) – taking advantage of price discount by ordering a large quantity, which in turn increases inventory holding cost as well as deterioration cost and by not ordering a large quantity at a discounted price. An attempt is made to find bounds on the beneficial discount rate. The model is supported with a numerical example.