Two level production inventory model for a deteriorating item with preservation technology using time varying demand under permissible delay in payment

Abstract

This paper presents a two level production inventory model for a deteriorating item with preservation strategy under permissible delay in payment in an infinite time horizon. Here two different rates of productions are considered, initially production started at one rate and after some time it may be switched over another rate such a situation is desirable in the sense that by starting at a low rate of production, a large quantum stock of manufacturing items at the initial stage is avoided, leading to reduction in the holding cost. The demand rate is assumed as time varying demand and the stock itself is depleted due to demand and deterioration. The supplier offers the retailer fully permissible delay in payment. Here M be the period of permissible delay in settling account without extra charges. But if the retailer settles the account after M, he/she will have to pay with interest for the inventory not sold after the due date M. The model has been formulated as profit maximization problem with respect to the retailer and is solved numerically through modified genetic algorithm (MGA). Finally, the model is illustrated through a numerical ex- ample, and sensitivity analyses have been done with the variation of demand and deterioration parameters on optimal profit.