Improving production policy for a deteriorating item under permissible delay in payments with stock-dependent demand rate

AbstractThis paper presents a production lot size inventory model in which the production rate constitutes of productions during both regular time and overtime. The demand rate is assumed as stock-dependent and the stock itself is depleted due to demand and deterioration. Supplier’s incentives include price discounts and granting of credit periods for account settlement within time M1, or the supplier allows interest-free credit upto an extended period M2. This formulation leads to a single objective optimization problem for maximum average profit evaluation through a real-coded genetic algorithm (GA) with rank-based selection and arithmetic crossover. The model is illustrated through a numerical example, and sensitivity analyses have been done with the variation of demand and deterioration parameters on optimal profit