An EPQ model of substitutable products under trade credit policy with stock dependent and random substitution

Many retailers are trying to attract more customers by offering the different offers to compete for market share. The offer of the similar items implies that the items may be substitutable type. Now a day two equally priced mutually substitutable products are arranged in the similar place such as Coke and Pepsi colas, Colgate and Close up, Progresso soups and Campbell etc. It is usually seen that a large amount of products (tooth paste, perfume, fruits, baked foods, vegetables, etc.) displayed in the market sometimes influenced the customers to purchase more product because of its stock, diversity, and brightness. Hence the items with more stock are preferable by the customers. In a simple meaning demand of one item is positively related to the displayed stock of the item and negatively infected by the stock of other item. In this research work, we are considering the demand of two substitute items. Since the items are substitutable, in case of a stock-out for one of them, a known fraction of its demand can be satisfied by using the stock of the other product. Demand of two substitutable items depends upon the inventory level. Substitutions among random customers are one of the realistic topics. In this paper for the first time we construct an EPQ model of substitutable items under trade credit with stock dependent substitutions and substitutions among random customers. The aim of this research work is to determine the relevant profit of each item. A real life numerical example is set to illustrate this model. Finally the model was solved by LINGO 13.0 software. Managerial insights and implications are also discussed.