abstract
- © 2019 The Authors. International Transactions in Operational Research © 2019 International Federation of Operational Research SocietiesGenerally, in the business world, it is observed that suppliers give different kinds of benefits to retailers due to advance payment. One of the popular benefits is instant cash discount due to advance payment. If a retailer pays off his total purchase cost before receiving the products, then he receives a certain percentage of cash discount instantly. However, if the retailer pays off a certain fraction of the total purchasing cost, then price discount is given only at the time of receiving the products while paying the remaining amount of the total purchasing cost. Using this concept, this paper formulates, under both cases of advance payment (full or partial), an inventory model for deteriorating products where shortages are allowed and demand function is considered as price and stock dependent. The closed-form solutions for each case are presented and two numerical examples are solved. In addition, a sensitivity analysis is also performed to show the effects of advance payment with discount facility.