The optimal inventory policies under permissible delay in payments depending on the ordering quantity

doi:10.1016/J.IJPE.2003.12.006

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The optimal inventory policies under permissible delay in payments depending on the ordering quantity

Journal Article•DOI•

The optimal inventory policies under permissible delay in payments depending on the ordering quantity

Kun-Jen Chung¹, Suresh Kumar Goyal², Yung-Fu Huang³•Institutions (3)

National Taiwan University of Science and Technology¹, Concordia University², Chaoyang University of Technology³

18 Feb 2005-International Journal of Production Economics (INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS)-Vol. 95, Iss: 2, pp 203-213

TL;DR: In this article, the problem of determining the economic order quantity under conditions of permissible delay in payments is considered, and an algorithm to determine the order quantity is developed to minimize the total variable cost per unit of time.

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About: This article is published in International Journal of Production Economics.The article was published on 2005-02-18. It has received 175 citations till now. The article focuses on the topics: Economic order quantity.

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Journal Article•DOI•

Supply chain finance: A systematic literature review and bibliometric analysis

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Xinhan Xu¹, Xiangfeng Chen¹, Fu Jia², Stephen Brown³, Yu Gong³, Yifan Xu¹ - Show less +2 more•Institutions (3)

Fudan University¹, University of York², University of Southampton³

01 Oct 2018-International Journal of Production Economics

TL;DR: Wang et al. as discussed by the authors adopted a systematic literature review methodology combined with bibliometric, network and content analysis based on 348 papers identified from mainstream academic databases, which provided insights not previously fully captured or evaluated by other reviews on this topic, including key authors, key journals and the prestige of the reviewed papers.

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361 citations

Journal Article•DOI•

An EOQ model with noninstantaneous receipt and exponentially deteriorating items under two-level trade credit

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Jui-Jung Liao¹•Institutions (1)

Chihlee Institute of Technology¹

01 Jun 2008-International Journal of Production Economics

TL;DR: In this paper, the authors considered the impact of the trade credit policy on the classical economic production quantity (EPQ) model for an item subject to exponential decays and developed a theorem to determine the optimal replenishment policies.

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203 citations

Journal Article•DOI•

Optimal pricing, shipment and payment policy for an integrated supplier–buyer inventory model with two-part trade credit

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Chia-Huei Ho¹, Liang-Yuh Ouyang², Chia-Hsien Su²•Institutions (2)

Ming Chuan University¹, Tamkang University²

01 Jun 2008-European Journal of Operational Research

TL;DR: An iterative algorithm is established to obtain the optimal pricing, ordering, shipping, and payment policy to maximize the joint expected total profit per unit time.

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169 citations

Additional excerpts

...…Jaggi (1995), Kim et al. (1995), Jamal et al. (1997), Shinn (1997), Chu et al. (1998), Chen and Chuang (1999), Chang and Dye (2001), Teng (2002), Chung and Huang (2003), Shinn and Hwang (2003), Chung and Liao (2004, 2006), Chung et al. (2005), Teng et al. (2005), Ouyang et al. (2005), and so on....
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Journal Article•DOI•

A century of evolution from Harris׳s basic lot size model: Survey and research agenda

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Alessandro Andriolo¹, Daria Battini¹, Robert W. Grubbström, Alessandro Persona¹, Fabio Sgarbossa¹ - Show less +1 more•Institutions (1)

University of Padua¹

01 Sep 2014-International Journal of Production Economics

TL;DR: In this article, the authors explore and discuss the evolution of these models during one hundred years of history, starting from the basic model developed by Harris in 1913, up to today.

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167 citations

Journal Article•DOI•

An eoq model under retailer partial trade credit policy in supply chain

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Yung-Fu Huang¹, Kuang-Hua Hsu¹•Institutions (1)

Chaoyang University of Technology¹

01 Apr 2008-International Journal of Production Economics

TL;DR: In this article, the authors investigate the retailer's inventory policy under two levels of trade credit to reflect the supply chain management situation and develop easy-to-use theorems to efficiently determine the optimal inventory policy for the retailer.

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163 citations

Cites background from "The optimal inventory policies unde..."

...There are several interesting and relevant papers related to trade credit such as Chung et al. (2005), Chung and Liao (2006), and Huang (2007) and their references....
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Journal Article•DOI•

Economic Order Quantity under Conditions of Permissible Delay in Payments

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Suresh Kumar Goyal¹•Institutions (1)

Concordia University¹

01 Apr 1985-Journal of the Operational Research Society

TL;DR: In this article, a mathematical model for obtaining the economic order quantity for an item for which the supplier permits a fixed delay in settling the amount owed to him is presented, and an example has been solved to illustrate the method.

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Abstract: In this paper, mathematical models have been derived for obtaining the economic order quantity for an item for which the supplier permits a fixed delay in settling the amount owed to him. An example has been solved to illustrate the method.

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1,204 citations

"The optimal inventory policies unde..." refers background or methods in this paper

...Theorems 1 and 2 give the solution procedure to find T when MXW=D: Theorems 3 and 4 give the solution procedure to find T when MoW=D: Then, we develop an algorithm to help us to decide T : Furthermore, Theorems 5 and 6 reveal the solution procedure to find T when W 1⁄4 0: Finally, when W 1⁄4 0 and s 1⁄4 c; this article develops some comparisons with Goyal’s model (1985) and demonstrate that the optimal cycle time is not longer than that of Goyal’s model (1985)....
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...Theorem 9 explains that the optimal cycle time when W 1⁄4 0 and s 1⁄4 c is not longer than that of Goyal’s model (1985)....
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...All rights reserve .2003.12.006 (1999), Chu et al. (1998), Chung (1998a, b, 2000), Goyal (1985), Jamal et al. (1997, 2000), Khouja and Mehrez (1996), Liao et al. (2000), Sarker et al. (2000a,b) and Shah and Shah (1998)....
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Journal Article•DOI•

Ordering Policies of Deteriorating Items under Permissible Delay in Payments

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S. P. Aggarwal¹, Chandra K. Jaggi¹•Institutions (1)

University of Delhi¹

01 Jan 1995-Journal of the Operational Research Society

TL;DR: In this paper, an attempt has been made to obtain the optimum order quantity of deteriorating items under a permissible delay in payments, where it is found that the supplier allows a certain fixed period to settle the account, but beyond this period interest is charged under the terms and conditions agreed upon and moreover, interest can be earned on the revenue received during the credit period.

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Abstract: In developing mathematical models in inventory control it is assumed that payment will be made to the supplier for the goods immediately after receiving the consignment. However, in practice, it is found that the supplier allows a certain fixed period to settle the account. During this fixed period no interest is charged by the supplier, but beyond this period interest is charged under the terms and conditions agreed upon and, moreover, interest can be earned on the revenue received during the credit period. In this paper an attempt has been made to obtain the optimum order quantity of deteriorating items under a permissible delay in payments. A numerical example is also given. Over the last two decades a lot of work has been published for controlling the inventory of deteriorating items. The analysis of decaying inventory problems began with Ghare and Schrader1, who developed a simple economic order quantity model with a constant rate of decay. Covert and Philip2 extended Ghare and Schrader's model and obtained an economic order quantity model for a variable rate of deterioration by assuming a two-parameter Weibull distribution. Misra3 developed the first production lot size model in which both a constant and variable rate of deterioration were considered and obtained approximate expressions for the production lot size with no backlogging. Furthermore, while developing a mathematical model in inventory control, it is assumed that the payment will be made to the suppliers for the goods immediately after receiving the consignment. However, in day-to-day dealing, it is found that a supplier allows a certain fixed period to settle the account. During this fixed period no interest is charged by the supplier, but beyond this period interest is charged by the supplier under the terms and conditions agreed upon, since inventories are usually financed through debt or equity. In case of debt financing, it is often a short-term financing. Thus, interest paid here is nothing but the cost of capital or opportunity cost. Also, short-term loans can be thought of as having been taken from the suppliers on the expiry of the credit period. However, before the account has to be settled, the customer can sell the goods and continues to accumulate revenue and earn interest instead of paying the overdraft that is necessary if the supplier requires settlement of the account after replenishment. Interest earned can be thought of as a return on investment since the money generated through revenue can be ploughed back into the business. Therefore, it makes economic sense for the customer to delay the settlement of the replenishment account up to the last day of the credit period allowed by the supplier. If the credit period is less than the cycle length, the customer continues to accumulate revenue and earn interest on it for the rest of the period in the cycle, from the stock remaining beyond the credit period. This point was not considered by Goyal4. The primary benefit of taking trade credit is that one can have savings in purchase cost and opportunity cost, which become quite relevant for deteriorating items. In such cases one has to procure more units than required in the given cycle to account for the deteriorating effect. In particular, when the unit purchase cost is high and decay is continuous, the saving due to delayed payment appears to be more significant than when the decay is continuous but

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793 citations

"The optimal inventory policies unde..." refers background in this paper

...Recently, Arcelus et al. (2003) modeled the retailer’s profitmaximizing retail promotion strategy, when confronted with a vendor’s trade promotion offer of credit and/or price discount on the purchase of regular or perishable merchandise....
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...The effect of supplier credit policies on optimal order quantity has received the attention of many researchers; see Aggarwal and Jaggi (1995), Chang and Dye (2001), Chang et al. (2001), Chen and Chuang...
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...The effect of supplier credit policies on optimal order quantity has received the attention of many researchers; see Aggarwal and Jaggi (1995), Chang and Dye (2001), Chang et al....
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...The effect of supplier credit policies on optimal order quantity has received the attention of many researchers; see Aggarwal and Jaggi (1995), Chang and Dye (2001), Chang et al. (2001), Chen and Chuang g author....
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Journal Article•DOI•

An ordering policy for deteriorating items with allowable shortage and permissible delay in payment

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A. M. M. Jamal¹, Bhaba R. Sarker², Shaojun Wang²•Institutions (2)

Southeastern Louisiana University¹, Louisiana State University²

18 Dec 1997-Journal of the Operational Research Society

TL;DR: In this article, a model to determine an optimal ordering policy for deteriorating items under a permissible delay of payment and allowable shortage was developed, and different facets of the permissible delays in payment were discussed, and this generalized model exhibits a set of solutions that reduces to an existing model.

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Abstract: In many inventory situations, the purchaser is allowed a permissible period to pay back the cost of goods bought without paying any interest. Depending on the length of that payment period, the purchaser can earn interest on the sales of the inventory. This paper develops a model to determine an optimal ordering policy for deteriorating items under permissible delay of payment and allowable shortage. Different facets of the permissible delays in payment are discussed, and this generalized model exhibits a set of solutions that reduces to an existing model. Results are discussed and demonstrated with an illustrative example.

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569 citations

Additional excerpts

...All rights reserve .2003.12.006 (1999), Chu et al. (1998), Chung (1998a, b, 2000), Goyal (1985), Jamal et al. (1997, 2000), Khouja and Mehrez (1996), Liao et al. (2000), Sarker et al. (2000a,b) and Shah and Shah (1998)....
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Journal Article•DOI•

An inventory model with deteriorating items under inflation when a delay in payment is permissible

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Hung-Chang Liao¹, Chih-Hung Tsai, Chao-Ton Su²•Institutions (2)

Oriental Institute of Technology¹, National Chiao Tung University²

15 Jan 2000-International Journal of Production Economics

TL;DR: In this paper, an inventory model for initial-stock-dependent consumption rate when a delay in payment is permissible is developed, where shortages are not allowed and the effect of the inflation rate, deterioration rate, and initial- stock dependent consumption rate and delay-in-payment are discussed.

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308 citations

Additional excerpts

...All rights reserve .2003.12.006 (1999), Chu et al. (1998), Chung (1998a, b, 2000), Goyal (1985), Jamal et al. (1997, 2000), Khouja and Mehrez (1996), Liao et al. (2000), Sarker et al. (2000a,b) and Shah and Shah (1998)....
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Journal Article•DOI•

A joint approach for setting unit price and the length of the credit period for a seller when end demand is price sensitive

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Prakash L. Abad¹, Chandra K. Jaggi²•Institutions (2)

McMaster University¹, University of Delhi²

11 Feb 2003-International Journal of Production Economics

TL;DR: In this article, the authors consider the seller-buyer channel in which the end demand is price sensitive and the seller may offer trade credit to the buyer, and provide procedures for determining the seller's and the buyer's policies under non-cooperative as well as cooperative relationships.

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302 citations

"The optimal inventory policies unde..." refers background in this paper

...Abad and Jaggi (2003) developed a joint approach to determine for the seller the optimal unit price and the length of the credit period when end demand is price sensitive. Chung and Huang (2003) investigated this issue within EPQ framework and developed an efficient solution procedure to determine the optimal cycle time for the retailer....
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...Abad and Jaggi (2003) developed a joint approach to determine for the seller the optimal unit price and the length of the credit period when end demand is price sensitive....
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