Inventory model considering trade discounts and scrap disposal with sustainability

Abstract

Inventory management in today’s scenario is very complex involving many factors exercising influence on each other. Studies are being made continuously to find the relationship among these factors to arrive at the most optimum solutions. This paper develops a mathematical model for inventory management, incorporating factors such as ordering, holding, screening, and disposal costs, along with quantity discounts, interest payable/earned, and transportation costs. The model considers three scenarios based on the relationship between the cycle time and the trade credit period.

The analysis determines the optimal order quantity and cycle time for each case. Case (ii), where interest is earned on revenue while avoiding interest charges, yields the lowest total cost. Conversely, case (i), which only accounts for inventory holding costs without any offsetting earnings, is the costliest.
Numerical examples illustrate the model’s application and validate the findings. The results provide insights for businesses to optimize their inventory management strategies, reduce costs, and improve overall efficiency within the supply chain.