Optimal Inventory Model for Deteriorating Items with Permissible Delay in Consideration to Default Risk

The study introduces an innovative approach to manage inventory for deteriorating items by taking into account the permissible delays and default risk. This perspective offers fresh insights into a complex problem faced by many businesses. A credit period is often extended by suppliers to their clients in order to foster long-term relationships and ensure their survival in the business environment. This draws in new clients, increasing market demand. Conversely, the provider is exposed to default risk when a credit period is present. In this paper, an inventory model is developed that deals with credit period dependent quadratic demand and default risk associated with sales revenue. The Deterioration rate under the natural environment is also incorporated with the inventory model. This article discusses the seller's best choice for determining the customer's allowable credit period duration and the purchase amount. Concerns about environmental degradation are also taken into account while making purchases in order to maximize profits. A solution procedure is given for finding the optimal solution of total profit. Numerical example is given to show the effectiveness of the model. Finally, sensitivity analysis is carried out to explore the managerial implications. This study will help significantly the seller in setting optimal credit periods. In future, this research can be extended to study inventory models with stochastic demand. This paper can be extended if shortages are allowed. Different preservation technologies can also be incorporated to reduce deterioration and enhance environmental protection.