The optimal ordering policy in a DCF analysis for deteriorating items when trade credit depends on the order quantity

In this paper, an inventory system for deteriorating items under the conditions of using the discounted cash-flows (DCF) approach to the permissible to delay payment will be considered. As a matter of fact, the supplier usually is willing to provide the retailer a permissible delay of payments if th...

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Bibliographic Details
Published in:International journal of production economics 2006-03, Vol.100 (1), p.116-130
Main Authors: Chung, Kun-Jen, Liao, Jui-Jung
Format: Article
Language:English
Subjects:
Deteriorating items
Discounted cash-flows (DCF)
Inventory
Trade credit
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Summary:In this paper, an inventory system for deteriorating items under the conditions of using the discounted cash-flows (DCF) approach to the permissible to delay payment will be considered. As a matter of fact, the supplier usually is willing to provide the retailer a permissible delay of payments if the retailer orders a large quantity. As a result, we consider that the delay in payments depends on the quantity ordered. That is, when the order quantity is less than that at which the delay in payments is permitted, the payment for the item must be made immediately. Otherwise, the fixed trade credit period is permitted. This paper incorporates all concepts of a DCF approach and the trade credit linked to ordering quantity and develops a new inventory model for deteriorating items to generalize Jaggi and Aggarwal (Int. J. Prod. Econ. 34 (1994) 151).
ISSN:0925-5273
1873-7579
DOI:10.1016/j.ijpe.2004.10.011