Optimal inventory policy with noninstantaneous receipt under trade credit

Optimal inventory policy with noninstantaneous receipt under trade credit

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Article ID: iaor2006707
Country: Netherlands
Volume: 98
Issue: 3
Start Page Number: 290
End Page Number: 300
Publication Date: Jan 2005
Journal: International Journal of Production Economics
Authors: , , ,
Keywords: credit
Abstract:

In the last two decades, the models for inventory replenishment policies under trade credit have been widely studied by several researchers. However, the extant papers only consider the effects of permissible delay in payments in the inventory systems. In some situations, the supplier also may offer a cash discount to encourage retailer to pay for his purchases quickly. On the other hand, an inventory model with instantaneous receipt is not a common feature in actual practice. For generality, this study develops an inventory model with noninstantaneous receipt under trade credit, in which the supplier provides not only a permissible delay but also a cash discount to the retailer. We then characterize the optimal solution and provide an easy-to-use criterion to find the optimal order strategies. Finally, several numerical examples are presented to illustrate the theoretical results.

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