Vendor-Buyer Deteriorating Inventory Model with Progressive Interest

Widyadana, I Gede Agus and HALIM, ANTHONY REINALDO (2013) Vendor-Buyer Deteriorating Inventory Model with Progressive Interest. In: The 3rdInternational Forum Conference on Logistic and Supply Chain Managment (LSCM) 2013, 27-06-2013 - 29-06-2013, Kuta, Bali - Indonesia.

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Abstract

In competitive market, many vendors try to increase their market by offering delay in payment. However to keep their financial balance and reduce lost, vendor only give specific period without interest and then she charges the buyer with progressive interest. This scheme is interesting for the buyer since the buyer does not need to pay in advance. The problem is when the vendor set the grace period and the progressive time period. These decisions will affect the vendor’s decision to set her order. This problem become more interesting for deteriorating items where the items are decay, evaporate, obsolescence, loss of quality or marginal value of a commodity. Deterioration decreases the usefulness of the good from its original condition. In this paper, we develop a mathematical model of vendor-buyer collaboration for deterioration item under progressive interest scheme. Since the model is too complex to be solved analytically, then we use Genetic Algorithm. A numerical example is used to illustrate the model and a sensitivity analysis is employed to verify the model. The solution of the model shows that collaboration model is more profitable for the vendor since the buyer will be forced to buy in large quantity.

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