Some modified mathematical analytic derivations of the annual total relevant cost of the inventory model with two levels of trade credit in the supply chain system

• Published in: Mathematical methods in the applied sciences 2019-07, Vol.42 (11), p.3967-3977
• Main Authors: Srivastava, Hari M., Chung, Kun‐Jen, Liao, Jui‐Jung, Lin, Shy‐Der, Chuang, Sheng‐Tu
• Format: Article
• Language: English
• Subjects: Cost analysis; Economic models; economic order quantity (EOQ); Inventory management; inventory modeling and optimization; mathematical analytic tools and techniques; Mathematical models; mathematical solution procedure; Order quantity; permissible delays in payments; supply chain system; Supply chains; trade credit financing
• ISSN: 0170-4214; 1099-1476
• DOI: 10.1002/mma.5626

Several recent studies in supply chain system and related areas explored various economic order quantity (EOQ) models for noninstantaneous deteriorating items with imperfect quality and trade credit financing. In particular, in the year 2007, Teng et al investigated an EOQ model in which the supplier offers the retailer the permissible delay period M and the retailer, in turn, provides the trade credit period N (with N≦M) to his/her customers. The main purpose of this article is twofold: (a) It modifies the annual total relevant cost TVC(T) in the study of Teng et al and presents the correct derivations of TVC(T) by applying mathematical analytic tools and techniques. (b) It exposes some logical and mathematical problems in the proof of Theorem 1 in Teng et al. It also corrects and overcomes all of the errors and shortcomings by systematically presenting the complete and mathematical solution procedures in order to locate all optimal solutions for the model in Teng et al.