AN EOQ MODEL FOR PROGRESSIVE PAYMENT SCHEME UNDER DCF APPROACH
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Abstract:
An attempt is made to formulate optimal ordering policies for the retailer when the supplier offers progressive credit periods to settle the account. We define progressive credit periods as follows: If the retailer settles the outstanding amount by M, the supplier does not charge any interest. If the retailer pays after M but before N(M < N), then the supplier charges the retailer on the un-paid balance at the rate Ic 1 . If the retailer settles the account after N, then he will have to pay an interest rate of Ic 2 ( Ic 2 > Ic 1 ). The objective function to be optimized is considered as present value of all future cash-out-flows. An algorithm is given to find the flow of optimal ordering policy. Analytic proofs are discussed to study the effect of various parameters on an objective function.Keywords:
Value (mathematics)
Trade Credit
Discounted cash flow
Present value
In the classical inventory (or) supply chain models, it was assumed that the retailers and their customers must pay for the items as soon as the items are received. However, in practice, the supplier usually is willing to provide the retailer a full trade credit period for payments and the retailer just offers the partial trade credit period to his/her customers. This paper develops economic order quantity-based inventory model to investigate the retailer's inventory policy for deteriorating items under two levels of trade credit in a supply chain management situation as a cost minimisation problem under partial trade credit option to their customers. Mathematical theorems, lemmas and algorithms are developed to efficiently determine the optimal inventory policy for the retailer. We deduce some previously published results of other researchers as special cases. Finally, numerical examples are given to illustrate the theorems and obtain a lot of managerial phenomena.
Trade Credit
Inventory cost
Perpetual inventory
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Trade Credit
Terminal value
Present value
Discounted cash flow
Value (mathematics)
Dynamic inconsistency
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To promote the new products,the supplier would offer re-order credit period to the retailer.when the supplier offer re-order trade credit to the retailer,the optimal retailer's order decisions under two levels of trade credit within the EOQ framework are investigated.Then the optimal order cycle and the optimal order quantity are provided for the retailer to minimize his costs by analyzing the costs functions of the retailer.Finelly,the model and the arithmetic are stimulated with a numerical example.A theoretical basis for the suppliers to promote their new products is provided.
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Trade Credit
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This paper develops an infinite time-horizon deterministic economic order quantity (EOQ) inventory model with deterioration based on discounted cash flows (DCF) approach where demand rate is assumed to be non-linear over time. The effects of inflation and time-value of money are also taken into account under a trade-credit policy of type "?/T1 net T". The results are illustrated with a numerical example. Sensitivity analysis of the optimal solution with respect to the parameters of the system is carried out.
Trade Credit
Present value
Value (mathematics)
Time horizon
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Trade credit is the most prevailing economic phenomena used by the suppliers for encouraging the retailers to increase their ordering quantity. In this article, an attempt is made to derive a mathematical model to find optimal credit policy and hence ordering quantity to minimize the cost. Even though, credit period is offered by the supplier, both parties (supplier and retailer) sit together to agree upon the permissible credit for settlement of the accounts by the retailer. A numerical example is given to support the analytical arguments. JEL. Classification: C02; C61
Trade Credit
Settlement (finance)
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Trade Credit
Economic shortage
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In general, a supplier/retailer frequently offer trade credit to stimulate their respective sales. The main purpose of this paper is to investigate the optimal supplier/retailer’s replenishment decisions under two levels of trade credit policy within the economic order quantity (EOQ) framework. This paper deals with the supplier/retailer’s inventory replenishment problem under two levels of trade credit in one replenishment cycle. A different approach of two levels of trade credit is used, which give more freedom to the supplier/retailer in business. In addition, the easy-to-use procedure is developed to efficiently find the optimal cycle time for the retailer under minimizing annual total relevant cost. Finally, a numerical example is given to illustrate these results.
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Discounted cash flow
Present value
Value (mathematics)
Terminal value
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