Supplier credit in the economic order quantity model

The standard economic order quantity model assumes that stocks are paid for when delivered. Supplier credit is widely available and can have considerable impact on holding costs and on the optimal order quantities. A simple extension to the standard economic order quantity model yields significant savings for items which have order cycles that are short relative to the period allowed for payment. The analysis also increases the attractiveness of joint replenishment models and highlights some difficulties of applying discrete demand models.