An economic order quantity model for deteriorating items with partially permissible delay in payments linked to order quantity

Liang-Yuh Ouyang, Jinn-Tsair Teng, Suresh Kumar Goyal and Chih-Te Yang

European Journal of Operational Research, 2009, vol. 194, issue 2, 418-431

Abstract: To attract more sales suppliers frequently offer a permissible delay in payments if the retailer orders more than or equal to a predetermined quantity W. In this paper, we generalize [Goyal, S.K., 1985. EOQ under conditions of permissible delay in payments. Journal of the Operational Research Society 36, 335-338] economic order quantity (EOQ) model with permissible delay in payment to reflect the following real-world situations: (1) the retailer's selling price per unit is significantly higher than unit purchase price, (2) the interest rate charged by a bank is not necessarily higher than the retailer's investment return rate, (3) many items such as fruits and vegetables deteriorate continuously, and (4) the supplier may offer a partial permissible delay in payments even if the order quantity is less than W. We then establish the proper mathematical model, and derive several theoretical results to determine the optimal solution under various situations and use two approaches to solve this complex inventory problem. Finally, a numerical example is given to illustrate the theoretical results.

Keywords: Inventory; EOQ; Trade; credits; Partially; permissible; delay; in; payment; Finance (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:194:y:2009:i:2:p:418-431

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