An Integrated Supply Chain Inventory Model for Imperfect Quality Items When Procurement Cost is Linked with Trade Credit Policies and Salvage Value

Abstract

This study develops an economic production model for manufacturer and retailer with credit-linked procurement cost. Here buy now and pay later policy is offered by manufacturer to retailer. In this model retailer’s procurement cost is linearly dependent on the credit period offered by the manufacturer. Quality of a product plays a very important role to attract buyers for a product. To increase the profit industries are always working on producing a good quality product. Manufacturer’s process cost is also dependent on the quantity demanded by the retailer.  The lot received by retailer contains imperfect quality items and items that could get deteriorated with time. It is assumed that rate of screening is more than demand so as to fulfill the demand by good quality products only. Shortages are not allowed. The model is explained with the help of numerical example and sensitivity analysis of some parameters.