A finite horizon deteriorating inventory model with two-phase pricing and time-varying demand and cost under trade credit financing using particle swarm optimization

In this paper, we consider a deterministic economic order quantity model with generalized type demand, deterioration and unit purchase cost functions under two levels of trade credit policy. Our objective is to find the optimal values of selling prices, replenishment number and replenishment scheme which maximize the total profit over the finite planning horizon. We establish the inventory system and provide structural properties of the optimal solution that facilitate computation. A particle swarm optimization with constriction factor is coded and used to solve the mixed-integer nonlinear programming problem by employing the properties derived from this paper. At the end, some numerical examples are used to illustrate the features of the proposed model.

► We formulate a pricing and lot-sizing problem assuming the demand rate to be influenced by both selling price and time. ► The inventory problem is solved effectively by employing the particle swarm optimization algorithm. ► We perform the sensitivity analysis to investigate the change of the total profit and the number of replenishments.