Retailer's optimal ordering policy under limited warehouse space and payments delay

Abstract

This paper is to modify and extend Goyal's model to allow the unit selling price and the unit purchasing price not necessarily be equal and the different payment rule will be adopted to reflect the real-life situations. We also extend the assumption that the retailer's storage space is limited, and the modified inventory replenishment model is developed so that the annual total cost is minimized. Five theorems are developed to efficiently determine the optimal cycle time and the optimal order quantity. These theorems can help the retailer accurately and quickly to determine the optimal replenishment policies. Numerical examples are given to illustrate all results obtained in this paper

Keywords:

• Inventory
• economic ordering quantity
• limited warehouse space
• payments delay