Probabilistic order level system with lead time when delay in payments are permissible

The probabilistic order level inventory model with lead time when shortages are permitted is developed when supplier allows some credit period T* for setting the accounts for the purchase quantity. The scheduling period T is known. Mathematical models are derived for both the cases: (i) T* ≤ T and (ii) T* > T. Expressions are derived for average expected total cost of the system and for obtaining optimum order level Z = Z0 under each case.