Research article

An inventory model of a three parameter Weibull distributed deteriorating item with variable demand dependent on price and frequency of advertisement under trade credit

¹ School of Engineering and Sciences, Tecnológico de Monterrey, E. Garza Sada 2501 Sur, C.P. 64849, Monterrey, Nuevo León, México
² Department of Mathematics, The University of Burdwan, Burdwan - 713104, India
³ Department of Operational Research, Faculty of Mathematical Sciences, New Academic Block, University of Delhi, Delhi 110007, India
⁴ The Logistics Institute – Asia Pacific, National University of Singapore, 21 Heng Mui Keng Terrace, Singapore 119613, Singapore

^* Corresponding author: lecarden@itesm.mx

Received: 19 August 2016
Accepted: 10 June 2017

Abstract

This paper develops an inventory model for a deteriorating item with variable demand dependent on the selling price and frequency of advertisement of the item under the financial trade credit policy. Shortages are allowed and these are partially backlogged with a variable rate dependent on the duration of waiting time until to the arrival of next order. In this inventory model, the deterioration rate follows a three-parameter Weibull distribution. The corresponding inventory model is formulated and solved by using the well-known generalized reduced gradient method along with an algorithm. To validate the inventory model, two numerical examples are considered and solved. Finally, based on one numerical example, the impacts of different parameters are studied by a sensitivity analysis considering one parameter at a time and leaving the other parameters fixed.