Discount Cash-Flow Analysis on Inventory Control under Various Supplier's Trade Credits

Jinn‐Tsair Teng

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

Abstract

AbstractIn practices, the supplier may simultaneously offer the customer: (1) a permissible delay in payments to attract new customers and increase sales, and (2) a cash discount to motivate faster payment and reduce credit expenses. Since all cash outflows related to inventory control that occur at different points of time have different values, we use the discount cash-flow (or DCF) approach to establish the models, and obtain the optimal ordering policies to the problem. We find that the DCF approach is not only simple to understand but also easy to identify which alternative is less cost. In addition, we also characterize the optimal solution and provide the closed-form solution to the problem. Furthermore, we also compare the optimal order quantity under supplier credits with the classical economic order quantity.

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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 2002On the economic order quantity under conditions of permissible delay in payments 2003Optimal retailer's ordering policies in the EOQ model under trade credit financing 2000An inventory model with deteriorating items under inflation when a delay in payment is permissible 2003An EOQ model for deteriorating items under supplier credits linked to ordering quantity 2001An inventory model for deteriorating items with partial backlogging and permissible delay in payments

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2014Reviewing the Literature of Inventory Models under Trade Credit Contact 2023Optimal production and predictive maintenance decisions for deteriorated products under advance-cash-credit payments 2013Retailer's optimal order and credit policies when a supplier offers either a cash discount or a delay payment linked to order quantity 2020Retailer’s optimal ordering and payment strategy under two-level and flexible two-part trade credit policy

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