An EPQ Inventory Model with Allowable Shortages for Deteriorating Items under Trade Credit Policy

Abstract

This paper attempts to obtain the replenishment policy of a manufacturer under EPQ inventory model with backorder. It is assumed here that the manufacturer delays paying for the received goods from the supplier and the items start deteriorating as soon as they are being produced. Based on these assumptions, the manufacturer’s inventory model is formulated, and cuckoo search algorithm is applied then to find the replenishment time, order quantity, and selling price with the objective of maximizing the manufacturer’s total net profit. Besides, the traditional inventory system is shown as a special case of the proposed model in this paper, and numerical examples are given to demonstrate better performance of trade credit. These examples are also used to compare the results of cuckoo search algorithm with genetic algorithm and investigate the effects of the model parameters on its variables and net profit.