Economic order quantity model for deteriorating items with imperfect quality and permissible delay on payment

In the classical inventory models, most of the time the issue of quality has not been considered. However, in realistic environment, it can be observed that there may be some defective items in an ordered lot, because of these defective items retailer incurs additional cost due to rejection, repair and refund etc. Thus, inspection/screening of lot becomes indispensible in most of the organizations. Moreover, it plays a very essential role when items are of deteriorating in nature. Further, it is generally assumed that payment will be made to the supplier for the goods immediately after receiving the consignment. Whereas, in practice, supplier does offers a certain fixed period to the retailer for settling the account. During this period, supplier charges no interest, but beyond this period interest is being charged as has been agreed upon. On the other hand, retailer can earn interest on the revenue generated during this period. Keeping this scenario in mind, an attempt has been made to formulate an inventory model for deteriorating items with imperfect quality under permissible delay in payments. Results have been validated with the help of a numerical example using Matlab7.0.1. Comprehensive sensitivity analysis has also been presented.