Quality decisions are one of the major decisions in inventory management. It affects customer’s demand, loyalty and customer satisfaction and also inventory costs. Every manufacturing process is inherent to have some chance causes of variation which may lead to some defectives in the lot. So, in order to cater the customers with faultless products, an inspection process is inevitable, which may also be prone to errors. Thus for an operations manager, maintaining the quality of the lot and the screening process becomes a challenging task, when his objective is to determine the optimal order quantity for the inventory system. Besides these operational tasks, the goal is also to increase the customer base which eventually leads to higher profits. So, as a promotional tool, trade credit is being offered by both the retailer and supplier to their respective customers to encourage more frequent and higher volume purchases. Thus taking into account of these facts, a strategic production model is formulated here to study the combined effects of imperfect quality items, faulty inspection process, rework process, sales return under two level trade credit. The present study is a general framework for many articles and classical EPQ model. An analytical method is employed which jointly optimizes the retailer’s credit period and order quantity, so as to maximize the expected total profit per unit time. To study the behavior and application of the model, a numerical example has been cited and a comprehensive sensitivity analysis has been performed. The model can be widely applicable in manufacturing industries like textile, footwear, plastics, electronics, furniture etc.
Activity-Based-Model (ABC) is used for the purpose of significant improvement for overhead accounting systems by providing the best information required for managerial decision. This pa-per discusses implacability of ABC technique on inventory valuation as a management account-ing innovation. In order to prove the applicability of ABC for inventory control a material driven medium-sized and privately owned company from engineering (iron and steel) industry is select-ed and by analysis of its production process and its material dependency and use of indirect in-ventory, an ABC model is explored for better inventory control. The case revealed that the ne-cessity of ABC in the area of inventory control is significant. The company is not only able to increase its quality of decision but also it can significantly analyze its cost of direct material cost, valuation of direct material and use its implications for better decision making.
When a supplier announces a price increase at a certain time in the future, for each retailer it is important to choose whether to purchase supplementary stock to take benefit of the current lower price or procure at a new price. This article focuses on the possible effects of price increase on a retailer’s replenishment strategy for constant deterioration of items. Here, quadratic demand is debated; which is appropriate for the products for which demand increases initially and subsequently it starts to decrease with the new version of the substitute. We discuss two scenarios in this study: (I) when the special order time coincides with the retailer’s replenishment time and (II) when the special order time falls during the retailer’s sales period. We determine an optimal ordering policy for each case by maximizing total cost savings between special and regular orders during the depletion time of the special order quantity. Scenarios are established and illustrated with numerical examples. Through, sensitivity analysis important inventory parameters are classified. Graphical results, in two and three dimensions, are exhibited with supervisory decision.
The present study investigates an inventory model for non-instantaneous deteriorating items under inflationary conditions with partially backlogged shortages. In today’s market structure consumers are looking for goods for which there is a delay in deterioration. At the same time, the consumers’ willingness to wait has been decreased over time, which leads to lost sales. Moreover in financial decision-making, the effects of inflation and time value of money cannot be oblivious to an inventory system. In this scenario, managing inventory of goods remains a challenging task for the decision makers, who may also have to rent warehouse under different prevailing factors such as, bulk discount, limited space in the retail outlet, or increasing inflation rates. With a focus on reduction of costs and increasing customer service, warehouse decision models are crucial for an organization’s profitability. Hence a mathematical model has been developed in the view of above scenario, in order to determine the optimal policy for the decision maker, by minimizing the present worth of total cost. The optimization procedure has been illustrated by a numerical example and detailed sensitivity analysis of the optimal solution has been performed to showcase the effect of various parameters. Managerial implications has also been presented to aid the decision making process.
As the long arm of the grinding, deep financial crisis continues to haunt the global economy, the effects of inflation and time value of money cannot be oblivious to an inventory system. Inflation, defined as a general rise in the prices of goods and services over a period of time, has monetary depreciation as one of its major side effects. And, since inventories correspond to substantial investment in capital for any organization, it would be unethical if the effects of inflation and time value of money are not considered while determining the optimal inventory policy. Moreover, deterioration of items is a phenomenon which cannot be ignored, as it may yield misleading results. Further, under the inflationary conditions, the different cost parameters including the price are bound to vary from cycle to cycle over the planning horizon. Another important factor is shortages which no retailer would prefer, and in practice are partially backlogged and partially lost. In order to convert the lost sales into sales, the retailer offers such customers an incentive, by charging them the price prevailing at the time of placing an order, instead of the current inflated price. Therefore, bearing in mind these facts, the present paper develops an inventory model for a retailer dealing with deteriorating items under inflationary conditions over a fixed planning horizon. The objective is to derive the optimal number of cycles and cycle length that maximizes the net present value of the total profit over a fixed planning horizon. An appropriate algorithm has been proposed to obtain the optimal solution. Finally, a numerical example is provided to illustrate the proposed model. Sensitivity analysis of the optimal solution with respect to major parameters is carried out and some managerial inferences have been presented.
In most of the published articles dealing with optimal order quantity model under permissible delay in payments, it is assumed that the supplier only put forwards fully permissible delay in payments if retailer ordered a bulky sufficient quantity otherwise permissible delay in payments would not be permitted. Practically, in competitive market environments and recession phases of business, every supplier wants to attract more retailers by the help of providing good facilities for trading. Necessity of order quantity may put a negative pressure on supplier’s demand. So, within the economic order quantity (EOQ) framework the main purpose of this paper is to broaden this extreme case by introducing a new credit policy, Flexible Trade Credit Policy (FTCP), for supplier which can help him provide more free space of trading to retailers. This policy, after adopting by suppliers, not only provides attractive trading environments for retailers but also enhances the demand of supplier due to the large number of new retailers. Here in, under this policy, an inventory system is investigated as a cost minimization problem to establish the retailer’s optimal inventory cycle time and optimal order quantity. Three theorems are established to describe and to lighten optimal replenishment policies for the retailer. Finally, numerical examples are considered to illustrate all these theorems and managerial insights are given based on considered numerical examples.
Productivity is an indicator of efficiency with which resources, both human and material, are transformed into useful services and goods. The vital purpose of the prevailing work was to analyze the factors involved in the improvement of productivity in all its types such as material, capital, labor, machine and total productivity at the plant. This was obtained by decreasing the manufacturing cost per component by reducing its cycle time and increasing the monthly production rate. The experimentation revealed that using proposed processes and improved tooling, monthly production rate has increased by 16.2% due to reduced cycle time, the number of defected components i.e. rejection rate has reduced up to 2%. A reduction of 6.78% in manufacturing cost per component was recorded. Tooling cost has reduced by more than 12%. Saving up to 50% in inspection cost has been recorded due to close dimensional tolerances and high surface finish achieved on components. An increase of 4.84% was recorded in total productivity.
In the existing literature of inventory modeling under the conditions of permissible delay in payments, researchers have assumed that the retailers have to settle their accounts at the end of credit period i.e. supplier accept only full amount at the end of the credit period. However in reality, supplier may either accept the partial amount at the end of the credit period and unpaid balance subsequently or the full amount at a fix point of time after the expiry of the credit period, if the retailer finances the inventory from the supplier itself. Further, in the classical deteriorating inventory models, the common unrealistic assumption is that all the items start to deteriorate as soon as they arrive in the system. However, in realistic environment, it is observed that there are several non-instantaneous deteriorating items that have a shelf life and start to deteriorate after a time lag, like dry fruits, potatoes, yams and even some fruits and vegetables etc. Considering the importance of above mentioned facts, the present study formulates a fuzzy inventory model for non-instantaneous deteriorating items under conditions of permissible delay in payments. The paper discusses all the possible cases which may arise and yet not considered in the previous inventory models under permissible delay in payments. Further, this paper also considers price-dependent demand and the possibility of higher interest earn rate than interest payable rate. The objective of this study is to determine the optimal decision policies for the retailer which maximizes the total profit. Finally, the numerical examples are solved by using the proposed algorithm to show the validity of the model followed by the sensitivity analysis.
In today’s era of higher competition in the business, there are many conditions such as offered concession in bulk purchasing, seasonality, higher ordering cost, etc., which force a retailer to purchase more quantities than needed or exceed the storage capacity. So in this situation the retailer has to purchase an extra warehouse named as rented warehouse to stock the extra quantity. In this paper an inventory model for deteriorating products with selling price dependent rate is developed. The occurring shortages are assumed to be partially backlogged and cycle time is also variable. The purpose of the development of this model is to compute the amount and time of order which can optimize the total average cost of the system. A solution procedure and numerical example are presented to illustrate the implementation of the proposed study. Sensitivity analysis concerning with distinct system parameters is also presented to demonstrate the model.
In this paper, an attempt is made to develop two inventory models for deteriorating items with variable demand dependent on the selling price and frequency of advertisement of items. In the first model, shortages are not allowed whereas in the second, these are allowed and partially backlogged with a variable rate dependent on the duration of waiting time up to the arrival of next lot. In both models, the deterioration rate follows three-parameter Weibull distribution and the transportation cost is considered explicitly for replenishing the order quantity. This cost is dependent on the lot-size as well as the distance from the source to the destination. The corresponding models have been formulated and solved. Two numerical examples have been considered to illustrate the results and the significant features of the results are discussed. Finally, based on these examples, the effects of different parameters on the initial stock level, shortage level (in case of second model only), cycle length along with the optimal profit have been studied by sensitivity analyses taking one parameter at a time keeping the other parameters as same.