Economic order quantity model for a product with expiration date, limited shelf space and freshness dependent selling price under the effect of trade credit financing

Abstract

In practise, supplier offers the retailer a credit/delay period for settling the account and no interest is charged on the outstanding account if the account is settled by the end of the delay period. With the consideration of trade credit, we develop an economic order quantity model for a product with expiration date and freshness dependent selling price. Objectives of our model are twofold. The initial one is the consideration of the circumstance that the demand of the product is dependent upon the freshness condition as well as selling price of the product and the last one is relaxation of inventory level at the end of cycle. The solution procedure of proposed optimization model is illustrated analytically and numerically by a couple of examples. Concavity of the average profit function is shown by plotting graphs. To study the effect of fluctuating the value of all parameters in the proposed maximization model a sensitivity analysis is carried out.