Inventory policies with freight discounts and disposals

This article considers the effect of freight discounts and disposals on the inventory policies of a profit-maximising firm with price-elastic demand and with price as a mark-up on the acquisition cost. In addition, the cost of placing an order is in part dependent upon a freight-cost structure, sensitive to the size of the order and upon the possibility of selling unwanted inventory at a lower price. A numerical example is used to illustrate the resulting inventory policies.