AN EOQ MODEL WITH LIMITED STORAGE CAPACITY UNDER TRADE CREDITS

Liang‐Yuh Ouyang · Kun‐Shan Wu · Chih-Te Yang

22 citations0/0 files storedAsia Pacific Journal of Operational Research

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Supply Chain and Inventory Management Sustainable Supply Chain Management Working Capital and Financial Performance

Abstract

In the classical economic order quantity (EOQ) inventory model, it was assumed that the retailer must pay for the received items immediately. However, in practice, the supplier not only allows retailer to settle the account after a certain fixed period but also may offer a cash discount to encourage the retailer to pay for his purchases as soon as possible. On the other hand, it is common practice in most inventory systems to hold excess stocks in a rented warehouse whenever the storage capacity of the owned warehouse is insufficient. Therefore, the purpose of this paper is to establish an EOQ model with limited storage capacity, in which the supplier provides cash discount and permissible delay in payments for the retailer. In the model, we develop some useful theorems to characterize the optimal solution and provide a simple method to find the optimal replenishment cycle time and payment time. Finally, several numerical examples are given to illustrate the theoretical results and some managerial insights are also obtained.

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References

1985Economic Order Quantity under Conditions of Permissible Delay in Payments 1995Ordering Policies of Deteriorating Items under Permissible Delay in Payments 1997An ordering policy for deteriorating items with allowable shortage and permissible delay in payment 1977Fundamentals of Financial Management 2002On the economic order quantity under conditions of permissible delay in payments 1997Retailer's pricing and lot sizing policy for exponentially deteriorating products under the condition of permissible delay in payments 2000An inventory model with deteriorating items under inflation when a delay in payment is permissible 2000Optimal payment time for a retailer under permitted delay of payment by the wholesaler

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2024Warehouse Inventory Model for Perishable Items with Hybrid Demand and Trade Credit Policy 2020Production and payment policies for an imperfect manufacturing system with discount cash flows analysis in fuzzy random environments 2023An optimal replenishment cycle and order quantity inventory model for deteriorating items with fluctuating demand 2017Optimising an integrated production–inventory system under cash discount and retailer partial trade credit policy

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