Credit financing for deteriorating imperfect-quality items under inflationary conditions

Abstract

In today’s technology-driven world, despite of efficient planning of manufacturing system and emergence of sophisticated production methods and control systems; the items produced have some fraction of defectives. However, these defective items can be removed from the lot through a screening process. Thus, the inspection of lot becomes essential, especially when items are deteriorating in nature. Further, in today’s uncertain global economy, due to rising inflation there is a consequent decline in the real value of money, which eventually forces the supplier to provide an attractive tradecredit policy to the retailer. Keeping this scenario in mind, an attempt has been made to formulate an inventory policy for a retailer dealing with imperfect quality items of deteriorating nature under inflation and permissible delay in payments. Results have been demonstrated with the help of a numerical example and sensitivity analysis is also presented to provide managerial insights into practice.