Multi-item sustainable green production system under trade-credit and partial backordering

Incorporation of sustainable management for the rework of defective items brings long lasting benefits. In global business, there are situations when the products are procured from a global supplier. There are chances that the received lot may contain a fraction of imperfect products. These imperfect products are still valuable and can be repairable to save the environment. It is sustainable to repair imperfect items in a local repair store as compared to sending it back to the supplier. The cost of carbon emissions is also incorporated in the function to incorporate the environmental impact on total profit. Meanwhile, the supplier also offers a multi-trade-credit-period to the buyer. The developed model is sustainable and reduces the environmental impact as well as benefits for interim financing. This paper has an objective to maximize the total profit by developing a synergic economic order quantity model by considering multi-trade-credit policy, rework, and shortages simultaneously. This model can help in making decisions to enhance the performance of sustainable inventory management by controlling the cycle time and a fraction of time for a global supply chain. A non-derivative approach is employed to develop a closed-form optimal result. The numerical illustration with sensitivity analysis is also drawn to provide managerial insights into real practices.

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PARTIAL BACKORDERING INVENTORY MODEL WITH LIMITED STORAGE CAPACITY UNDER ORDER-SIZE DEPENDENT TRADE CREDIT

Technological and Economic Development of Economy ◽

10.3846/tede.2021.15704 ◽

2021 ◽

Vol 0 (0) ◽

pp. 1-32

Author(s):

Wen-Hui Jiang ◽

Ling Xu ◽

Zhen-Song Chen ◽

Witold Pedrycz ◽

Kwai-Sang Chin

Keyword(s):

Trade Credit ◽

Storage Capacity ◽

Optimal Solution ◽

Capacity Constraints ◽

Inventory Model ◽

Optimal Order ◽

Model Parameters ◽

Order Quantity ◽

Size Dependent ◽

Partial Backordering

This study formulates an inventory model with limited storage capacity under the condition of order-size dependent trade credit. Shortages are allowed and partially backlogged. The objective of this study is to determine the optimal replenishment cycle length, the optimal fraction of no shortage, and whether retailers should choose to rent an extra warehouse to store more items, such that retailers’ total annual profit is maximized. We prove the global optimally of objective functions and derive the closed-form optimal solution. Some numerical examples are presented to illustrate the applicability of the proposed model. Sensitivity analysis is carried out and managerial insights are obtained. We find that if retailers’ own warehouse capacity is relatively small, they always benefit from enlarging order quantity and renting an extra warehouse; meanwhile, suppliers further prolong the credit period is beneficial for both parties. On the contrary, as retailers’ own warehouse capacity increases and exceeds the optimal order quantity under that of without capacity constraints, adopting the same replenishment strategy as that without capacity constraints is profitable for retailers. Our results also reveal that other model parameters (e.g., ordering cost, inventory holding cost, shortages cost, backordering rate, etc.) have a significant impact on retailers’ optimal decisions.

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