An EOQ model for progressive payment scheme under DCF approach

An EOQ model for progressive payment scheme under DCF approach

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Article ID: iaor20073192
Country: Singapore
Volume: 23
Issue: 4
Start Page Number: 509
End Page Number: 524
Publication Date: Dec 2006
Journal: Asia-Pacific Journal of Operational Research
Authors: , ,
Keywords: financial
Abstract:

An attempt is made to formulate optimal ordering policies for the retailer when the supplier offers progressive credit periods to settle the account. We define progressive credit periods as follows: If the retailer settles the outstanding amount by M, the supplier does not charge any interest. If the retailer pays after M but before N(M < N), then the supplier charges the retailer on the un-paid balance at the rate lc1. If the retailer settles the account after N, then he will have to pay an interest rate of lc2 (lc2 > lc1). The objective function to be optimized is considered as present value of all future cash-outflows. An algorithm is given to find the flow of optimal ordering policy. Analytic proofs are discussed to study the effect of various parameters on an objective function.

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