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A sustainable inventory system with the advanced payment policy and trade-credit strategy for a two-warehouse inventory system

Abu Hashan Md Mashud (Department of Mathematics, Hajee Mohammad Danesh Science and Technology University, Dinajpur, Bangladesh)
Hui-Ming Wee (Department of Industrial and Systems Engineering, Chung Yuan Christian University, Chungli, Taiwan)
Biswajit Sarkar (Department of Industrial Engineering, Yonsei University, 50 Yonsei-ro, Sinchon-dong, Seodaemun-gu, Seoul, South Korea)
Yu-Hua Chiang Li (Department of Industrial and Systems Engineering, Chung Yuan Christian University, Chungli, Taiwan)

Kybernetes

ISSN: 0368-492X

Article publication date: 10 June 2020

Issue publication date: 3 May 2021

Abstract

Purpose

This paper aims to consider a sustainable inventory model with price dependent demand, non-instantaneous deterioration rate, discount facility, partially backlogged shortages and advance and delay in payments for a two-warehouse system.

Design/methodology/approach

This model considered a non-instantaneous deterioration, which starts after a certain period with a constant rate. The deterioration rate in the rented warehouse is more compared to own warehouse. The proposed model focused on two things. The first one is to the benefits of the advance payments strategy and delayed payment for the retailer and supplier, where the two-warehouse system is available and the second one is using an appropriate discount facility on no of the installment to maximize the total profit. The classical optimization technique is used to solve the problem.

Findings

The combination of trade-credits and advance payments is initiated to provide more benefits to the retailer. The findings prove that advance payments, which are received from the retailer to the supplier are beneficial for the supplier, who can influence the demand increase because of higher lower selling prices. Decreasing the selling price is used as a catalyst to increase demand. It also extends the discount concept of Khan et al. (2019, 2019b).

Research limitations/implications

This model is limited by the fact that it does not consider variable deterioration. Therefore, the proposed inventory model could be extended by considering variable deterioration, as well as fully backlogged shortages and time-dependent demand function.

Originality/value

The study simultaneously considers a non-instantaneous deterioration inventory model, advance-payment, trade-credit for a sustainable two-warehouse inventory system. From the literature search to the best of knowledge no researcher has undergone this sort of study.

Keywords

Acknowledgements

The authors are thankful to anonymous reviewers and the editor for their constructive comments to improve the research article.

The first author is grateful to the Institute of Research and Training (IRT), Hajee Mohammad Danesh Science and Technology University, Dinajpur, Bangladesh for their financial assistance to carry out the research.

Citation

Mashud, A.H.M., Wee, H.-M., Sarkar, B. and Chiang Li, Y.-H. (2021), "A sustainable inventory system with the advanced payment policy and trade-credit strategy for a two-warehouse inventory system", Kybernetes, Vol. 50 No. 5, pp. 1321-1348. https://doi.org/10.1108/K-01-2020-0052

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited