Retailer’s economic ordering policy with finite replenishment rate when delay in payments is permissible

Abstract

This paper extends Chung et al. (2002) within the economic production quantity (EPQ) framework. In the paper of Chung et al. (2002), they modified Goyal’s model (1985) to presume that the unit selling price and the unit purchasing price are not necessarily equal to reflect the real-life situations. Furthermore, their paper proposed that at the end of the credit period, the retailer would borrow 100% purchasing cost from the bank to pay off the account. This paper will extend Chung et al. (2002) to the case that the supplier at a finite rate replenishes the units. When the supplier’s replenishment rate approaches to infinite, Chung et al. (2002) will be a special case of this paper. Two efficient theorems are developed to determine the optimal cycle time and the optimal order quantity. Numerical examples are given to illustrate these theorems.

Keywords:

• Inventory
• EOQ
• EPQ
• trade credit
• permissible delay in payments