Optimal ordering policies under conditions of extended payment privileges for deteriorating items

Optimal ordering policies under conditions of extended payment privileges for deteriorating items

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Article ID: iaor20071595
Country: Cuba
Volume: 26
Issue: 3
Start Page Number: 251
End Page Number: 258
Publication Date: Sep 2005
Journal: Revista de Investigacin Operacional
Authors: , ,
Keywords: deteriorating items
Abstract:

This paper deals with optimal order quantities for firms, where units in an inventory are subject to deterioration at a constant rate, which are offered a one time opportunity to delay payment for an order of a commodity. Such delayed payment reduces purchase cost which is a function of the return available on alternative investments, the number of units ordered and the length of the extended period. Optimal order quantities are developed for extended payment privileges that occur at a reorder point. Four supplier's extended payment scenarios are evaluated. An analysis is conducted to determine the sensitivity of derived model to changes in the various input parameters.

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