An EPQ Model with Increasing Demand and Demand Dependent Production Rate under Trade Credit Financing

• Main Author: Juanjuan QIN
• Format: Article
• Language: English
• Published: Kharazmi University 2015-05-01
• Series: International Journal of Supply and Operations Management
• Subjects: EPQ; Trade credit financing; Increasing demand; Demand dependent production rate
• Online Access: http://ijsom.com/article_2352_460.html

This paper investigates an EPQ model with the increasing demand and demand dependent production rate involving the trade credit financing policy, which is seldom reported in the literatures. The model considers the manufacturer was offered by the supplier a delayed payment time. It is assumed that the demand is a linear increasing function of the time and the production rate is proportional to the demand. That is, the production rate is also a linear function of time. This study attempts to offer a best policy for the replenishment cycle and the order quantity for the manufacturer to maximum its profit per cycle. First, the inventory model is developed under the above situation. Second, some useful theoretical results have been derived to characterize the optimal solutions for the inventory system. The Algorithm is proposed to obtain the optimal solutions of the manufacturer. Finally, the numerical examples are carried out to illustrate the theorems, and the sensitivity analysis of the optimal solutions with respect to the parameters of the inventory system is performed. Some important management insights are obtained based on the analysis.