Finance

Supply chain

Business

Demand curve

Stock (firearms)

Purchasing

Nash equilibrium

Economic order quantity

Engineering

Marketing

Economics

Microeconomics

Profit (economics)

Revenue

Trade credit

Operations management

Inventory management

Mechanical engineering

Journal of Industrial and Management Optimization

This article is concerned with a multi-item inventory model for deteriorating items. The model is formed on the basis of a two-level supply chain policy, i.e., based on manufacturer's and retailer's perspective. The deterioration rate is considered as constant. The demand factor of any items suffer from a large amount of stock level; so, we consider stock-dependent demand function. The demand of any item is also dependent on its selling price; thus, a price-dependent demand function is introduced here. The retailer adopts the trade-credit policy for his customers in order to promote market competitiveness. He can earn revenue and interest after the customer pays the amount of purchasing cost to the retailer until the end of the trade-credit period, offered by the supplier. Shortages are allowed in the retailer's model as it is a very realistic item, too. A price discount on backordered commodities is offered for those customers who are willing to backorder their demand. Thereafter, we present an easy analytical solution procedure to find the total profit for both manufacturer and retailer. We also use the classical game theory and Nash equilibrium approach to find an optimal solution of the joint profit. The results are discussed with several numerical examples to illustrate our model and to provide some managerial insights related to the model. Furthermore, a parametric sensitivity analysis of the optimal solutions is provided and a concavity figure of our profit function is supplied to stabilize our model. The paper ends with a conclusion and an outlook to future research projects.

Multi-item deteriorating two-echelon inventory model with price- and stock-dependent demand: A trade-credit policy