Stochastic Inventory Model for Ameliorating Items under Supplier’s Trade Credit Policy

Kandpal Deepa H. & Tinani Khimya S. Department of Statistics, Faculty of Science, The M.S. University of Baroda Vadodara-390002, Gujarat, India . ABSTRACT This paper develops a model to determine an optimal ordering policy for deteriorating items under permissible delay of payment and allowable shortage for future supply uncertainty for two suppliers. In this paper we have introduced the aspect of part payment. A part of the purchased cost is to be paid during the permissible delay period. Spectral theory is used to derive explicit expression for the transition probabilities of a four state continuous time markov chain representing the status of the systems. These probabilities are used to compute the exact form of the average cost expression. We use concepts from renewal reward processes to develop average cost objective function. Optimal solution is obtained using Newton Raphson method in R programming. Finally sensitivity analysis of the varying parameter on the optimal solution is carried out.