An EOQ model with time dependent deterioration under discounted cash flow approach when supplier credits are linked to order quantity

This article deals with an inventory model under a situation in which the supplier offers the purchaser some credit period if the purchaser orders a large quantity. Shortages are not allowed. The effects of the inflation rate on purchase price, ordering price and inventory holding price, time dependent deterioration of units and permissible delay in payment are discussed. A mathematical model is developed when units in inventory are subject to time dependent deterioration under inflation when the supplier offers a permissible delay to the purchaser if the order quantity is greater than or equal to a pre–specified quantity. Optimal solution is obtained and algorithm is given to find the optimal order quantity and replenishment time, which minimizes the total cost of an inventory system in different scenarios. The paper concludes with a numerical example to illustrate the theoretical results and interdependence of parameters is studied for the optimal solutions.