An inventory model with deteriorating items under inflation and time discounting when the supplier offers trade credit and quantity discounts

An inventory model for deteriorating items with price-dependent demand is developed under inflation and time discounting when the supplier offers trade credit and quantity discounts. This paper applies the discounted cash flow (DCF) approach for analysis of the retail price and replenishment problems over a finite planning horizon. In this paper, mathematical models are derived under two different circumstances, i.e., Case I: the credit period is less than or equal to the cycle time for settling the account; and Case II: the credit period is greater than the cycle time for settling the account. In addition, an optimal solution procedure is developed to find the optimal number of replenishment, cycle time, retail price and order quantity such that the total present value of profits is maximized. Finally, a numerical example is given to illustrate the results of the proposal model.