Understanding supplier credits in an inflationary environment when reserve money is available

Understanding supplier credits in an inflationary environment when reserve money is available

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Article ID: iaor200969154
Country: United Kingdom
Volume: 6
Issue: 4
Start Page Number: 459
End Page Number: 474
Publication Date: Jul 2009
Journal: International Journal of Operational Research
Authors: ,
Keywords: inflation, credit risk
Abstract:

A deterministic inventory model for a deteriorating item is explored in an inflation-induced environment for a finite planning horizon. The supplier, as a policy, offers credit limit to his retailers and charges no interest during this period. The retailer has the reserve money to pay off the supplier in the beginning, but takes advantage of his credit policy. Inflationary effects have been studied using the Discounted Cash Flow (DCF) approach. Numerical examples have been presented to explain the theory while sensitivity analysis with respect to inflation rate and credit limit has been done.

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