An integrated deteriorating inventory model with permissible delay in payments and price‐sensitive stock‐dependent demand

An integrated inventory system supply chain comprising of a single vendor and a single buyer is formulated to maximise the total profit of the system as whole. The optimal solution for the system, however, may not be agreeable to both parties. To ensure mutual benefit, a negotiation factor is incorporated to share profit between the players according to their contributions. The effect of permissible delay in payments is studied for sharing profit in the integrated system. The units in inventory are subject to constant deterioration. The demand is stock dependent and production rate is proportional to the demand rate. A numerical example is provided to support the development of the model. The sensitivity analysis of model parameters is carried out, it is also established that the percentage of extra total profit is higher when the players of the supply chain opt for an integrated strategy.