1

1. Abstract

In this work, an inventory model has been investigated for a deteriorating item under time

dependent demand. Partially backlogged shortages are considered with the length of the

waiting time of the customers. Advance payment, another realistic feature, is introduced where

a retailer makes an order of the product by paying a certain portion of the total purchase cost

before receiving the product with an equal instalment and the rest amount has to be paid at the

receiving time of the lot. Due to the high nonlinearity of the corresponding optimization

problem, to find the closed form solution of the objective function is a formidable task. To

validate the proposed model, one numerical examples have been solved. Finally, the effects of

changes of different parameters have been studied graphically of the proposed model and a

fruitful conclusion has been drawn.

Keyword: EOQ, deterioration, time dependent demand, advance payment, partial backlogged

shortage
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2. Introduction

In the existing literature, a lot of research works have been reported by several researchers

in the related area/field of permissible delay in payments whereas very few research works

have been studied due to consideration of advance payment scheme. Advance payment scheme

ensures about payment as well as deliver the goods on time. The concept of advance payment

was introduced by Zhang (1996). In his model, he considered a fixed per-payment cost. After a

long time, Maiti et al. (2009) investigated an inventory system with prepayment effect. Gupta

(2009) proposed an inventory model by taking the inventory parameters as interval-valued with

advance payment scheme and solved by genetic algorithm. Thangam (2012) studied an

advance payment inventory model with a price discount for deteriorating item. Taleizadeh et al.

(2013) investigated an inventory model with multiple prepayments under constant demand.

Zhang et al. (2014) studied Inventory models considering both advance payment in first model

and advance payment & delayed in payment in second model. Taleizadeh (2014a) introduced

an inventory model for evaporating items under an advance payment scheme. Taleizadeh

(2014b) modified of Taleizadeh (2014a) by taking multiple prepayments with partially

backlogged shortages. Zia and Taleizadeh (2015) developed an inventory model by taking both

advance payment and delayed payment in together. Zhang et al. (2016) proposed inventory

model with a two-stage supply chain under the advanced payment scheme. Li et al. (2017)

investigated cash flow analysis for deteriorating inventory model under advance payment

scheme. Taleizadeh (2017) studied the disruption effect in the inventory system with advance

payment situations. Khan et al. (2018) proposed two warehouse inventory model with multiple

prepayment scheme. Shaikh et al. (2019) introduced an advance payment inventory model

where the inventory costs are interval-valued.

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Every product has a certain lifetime i.e., after certain time period every product loses their

freshness. Generally, this type of phenomenon is called deterioration. For the first time, Ghare

and Schrader (1963) proposed this type of concept in the existing literature. Philip (1974)

generalized this concept and introduced Weibull distribution deterioration in the area of

inventory control. Skouri et al. (2009) investigated the deteriorating inventory model with ramp

type demand where the deterioration rate follows Weibull distributed deterioration. Hung

(2011) modified Skouri’s et al. (2009) model by taking partially backlogged shortages with the

same type of demand. Yang (2012) studied two warehouse inventory model with Weibull

distribution deterioration rate under IFS and SFI situations. Sarkar and Sarkar (2013)

introduced an inventory model where the deterioration rate is time-varying. Bhunia et al.

(2014) proposed inventory model for deteriorating item where the deterioration rate follows

Weibull distribution. Sarkar et al. (2015) introduced credit policy inventory model with

variable deterioration rate. Shaikh et al. (2017) studied non-instantaneous inventory model with

deterioration under stock dependent demand. Pervin et al. (2018) proposed an inventory model

with time-dependent demand and random deterioration. Tiwari et al. (2018) studied expiration

date related deteriorating inventory model under trade credit financing.

In this study, we have investigated an inventory models under time dependent demand

with advance payment with instalments facility. Here, we have considered constant

deterioration rate. Partially backlogged shortages are considered with the exponentially length

of the waiting time of the customers. In addition, we have considered that retailer makes an

order of the product by paying a certain portion of the total purchase cost before receiving the

product with an equal instalments and the rest amount has to be paid at the receiving time. To

validate the proposed model, one numerical examples have been solved and show the

convexity graphically by using MATLAB. Finally, the effects of changes of different

parameters have been studied graphically and a fruitful conclusion has been drawn.
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3. Assumption and Notation

To develop the inventory model, we have considered the following assumptions and notation

3.1. ASSUMPTIONS:

I. We have considered the demand of this model for a single item, depends on time
i.e.
D(t ) = a + bt , 0  t  t1
= a, t1  t  T
II. The deterioration rate is constant which is  , (0    1)
III. No replacement or repairs for the deteriorated products have been considered
during this model.
IV. Inventory planning horizon is infinite.
V. The enterprise pays a fraction k of the blot by paying the remaining purchasing
cost.
VI. The holding cost per unit is Ch .
VII. Shortages are allowed and during the stock out period, a fraction  of the demand
will be back order.

3.2. NOTATIONS:
Notations Unit Descriptions
A $/order Ordering cost
A Constant Constant part of the demand rate (a>0)
B Constant Coefficient of time in demand rate (b>0)
P $/unit Selling price per unit
Cl $/unit Opportunity cost per unit
Cs $/unit Shortage cost
N $/unit Selling price per unit
 Constant Deterioration rate
Cp Unit Purchase cost per unit
 Constant
M Year Length of the lead time during which the enterprise will
pay the payments
n Constant Number of equally spaced pre payments during the lead
time
k Constant Fraction of the purchasing cost must be paid with
multiple payment
Cd $/unit Deterioration cost per unit
td year Time at which deterioration is start
R Units Backlogged units
S Units Total inventory level
T year The length of the replenishment cycle
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4. PROBLEM DESCRIPTION:
Let us assume that an enterprise makes an order of (S+R) units of a product by a fraction k of
the purchasing cost by n equal multiple instalments at equal intervals within the lead time M
and receives the lot by paying the remaining purchasing cost at time t=0. Shortly after R units
are utilized to fulfil the backlogged demand partially consequently the on hand inventory level
becomes S.

I (t )

S
t =0

t = t1 t =T
time
t = td R
M

Now at any time t the inventory level I (t ) can be described by the following differential
dI
= −(a + bt ) 0  t  td (1)
dt
dI
+  I (t ) = −(a + bt ) td  t  t1 (2)
dt
dI
= −ae− (T −t ) t1  t  T ( 3)
dt
Subject to the initial and boundary conditions are
I (0) = S ,
I (t ) is continuous at t = td
I (t ) = 0 at t = t1
I (t ) = − R at t = T
From (1)
dI
= −(a + bt ) 0  t  td
dt
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dI
+ bt = − a
dt
Solving and using the initial condition, we get

a −bt
I (t ) = (e − 1) + Se−bt ( 4)
b

Again from (2)

dI
+  I (t ) = −(a + bt ) td  t  t1
dt
Solving and using the condition I (t1) = 0 , we get
a  (t1−t ) b b
I= (e − 1) + (t1e (t1−t ) − t ) + 2 (1 − e (t1−t ) ) (5)
  
From (3)
dI
= ae− (T −t ) t1  t  T
dt
Solving the above and using the condition I (T ) = − R , we get
a
I= (e− (T −t ) − 1) − R ( 6)


Again from (4) and (5), using the continuity of I at t = td we get

t2 a
S = atd + b d + [e (t1−td ) − 1] + [t1e (t1−td ) − td ] +
b
2  
[1 − e (t1−td ) ]
b
(7)
 2

Again using I (t1) = 0 , we get from (6)

a
R= [1 − e− (T −t1) ] (8)


Here we have described inventory related cost for this model derived from the assumptions:

(a) Ordering cost : A

(b) Purchasing cost : Cp(S+R)

td t1
(c) Holding cost: C h  I (t )dt + Ch  I (t )dt
0 td

td2 t3 C
− b d + 2h (e (t1−td ) − 1)(a + bt1 − )
b
= Std − a
2 6  
C b C b
+ h (t1 − td )( − a) − h (t12 − td2 )
  2
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T
 a a 
(d) Shortage cost: − Cs  I (t )dt = Cs ( R − )(T − t1 ) + 2 (1 − e− (T −t1) ) 
t1    

t1
Cd  ( t1−td )  b  Cd b
(e) Deterioration cost:  I (t )dt =

e  a + bt1 −  −
  
(a + bt1 − )

td
b C b
+ Cd (t1 − td )( − a) + d (td2 − t12 )
 2

 kC p ( S + R) M  n +1
(f) Capital cost: = Ic  (1 + 2 + 3 + ... + n)  = I c MkC p ( S + R )
 n n  2n

 1 
(g) Lost sale: aC1  (T − t1 ) − (1 − e − (T −t1 ) ) 
  

Therefore , the total cyclic cost is

 Ordering cost + purchase cost + Holding cost + shortage cos t +

X = 
 Capital cos t + Lost sale 

 td2 td3 Ch  (t1−td ) b 

 A + C p ( S + R ) + Std − a − b + 2 (e − 1)(a + bt1 − ) 
 2 6   
 C 
 + h (t1 − td )( − a) − h (t12 − td2 ) + Cs ( R − )(T − t1 ) + − (T −t1 )  
b C b a a
(1 − e ) +
 
   2   2 
 
 n + 1 I c MkC p ( S + R ) + aC1 (T − t1 ) − 1 (1 − e − (T −t1) )  
 2n    
 
 

X
Therefore, total cost of per unit time is TC =
T

So, the optimization problem is

X
MinimizeTC =
T

subject to T  0
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5. Numerical Illustration

In order to study the applicability of our results and also to achieve marginal insights of our

proposed models, we have solved one with the help of LINGO 18 software.

Example: Model with shortages

Let C 0 = $300 /order, a = 50 , b = 5 , C p = $16 /unit, Cl = $25 /unit, C h = $1 /unit,

 = 0.05 ,  = 1.5 , M = 0.25 years, n = 20 , I c = 0.12 /dollar/year, k = 0.4 , t d = 0.05 year,

C s = $20 /unit.

Hence, the optimal solutions, from the above example are t1 = 1.6447 years, T = 1.8936
* *

years, S * = 92.6283 units, R * = 10.3871 units, Q * = 103.0154 units, TC (min) (t1 , T ) = $1115.061 .

  2TC (.)  2TC (.) 

 
 t12 T t1 
Since the eigenvalues of the Hessian matrix 2 are 999.447 and 52.1295, the
  TC (.)  2TC (.) 
 
 T t1 T 2 

obtained results are optimal. Moreover, the convexity of the total cost function can be observed

from Fig.- 2.
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Fig.- 2. Convexity of the objective function w.r.t T and t1

6. Sensitivity Analysis

To investigate the impact of optimal values of t1 , T , S , R along with the total profit per unit

time, a sensitivity analysis is carried out with respect to different system parameters of the

proposed example by graphically which reveals how much variation on optimal values could

be if each parameter is innovated at a time in certain percentage. For this purpose, changing the

value of one parameter at a time from -20% to +20% and keeping the values of the rest of the

parameters as same, the corresponding results are shown in Fig.3-8 which are self-expletory.
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Fig-3

Fig-4
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Fig-5

Fig-6
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Fig-7

Fig-8
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7. Conclusion

In this work, we have studied an inventory models with advanced payment for a deteriorating

product where as demand of the product is dependent on the time when the inventory level is

positive whereas constant when shortages occurred. A numerical example is solved to examine

the validity of the proposed model. Due to highly nonlinearity of the objective function, we

cannot found closed from solution of the objective function as well as decision variable.

However, we have shown the convexity by graphically as well as numerically by using the

eigen value technique.

For further research, one can extend the proposed models incorporating several realistic

features such as non-linear price-dependent demand pattern, stock-dependent demand,

displayed stock-dependent demand, non-linear holding cost or trade credit policy (single level,

two level, partial and credit risk customers). Also, by relaxing the zero-ending case by non-

ending inventory model would be another interesting extension of the model without shortages.

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