Credit Financing in Economic Ordering Policies for Defective Items with Order Overlapping

In the classical inventory models, most of the time the issue of quality of the items has not been given due attention. However, in realistic environment, it can be observed that there may be some defective items in an ordered lot, because of these defective items retailer may incurs additional cost due to rejection, repair and refund etc. Thus, inspection/screening of lot becomes essential in most of the organizations. Shortages may occur due to defective items, which can be prevented by placing an order at the time when the inventory level is good enough to meet the demand during the screening process. Further, it is generally assumed that payment will be made to the supplier for the goods immediately after receiving the consignment. Whereas, in practice, supplier does offers a certain fixed period to the retailer for settling the account. During this period, supplier charges no interest, but beyond this period interest is being charged as has been agreed upon. On the other hand, retailer can earn interest on the revenue generated during this period. Keeping this scenario in mind, an attempt has been made to formulate an inventory model for imperfect quality items under the condition of permissible delay in payments. Results have been validated with the help of a numerical example. Comprehensive sensitivity analysis has also been presented.