Optimal Economic Ordering Policy with Trade Credit and Discount Cash-Flow Approach
Abstract: In this paper, an
inventory model for deteriorating items under two levels of trade credit will
be established. The trade credit policy depends on the retailer’s order
quantity. When the retailer’s order quantity is greater than or equal to a
predetermined quantity, both of the supplier and the retailer are taking trade
credit policy; otherwise, the delay in payments is not permitted. Since the
same cash amount has different values at different points of time, the discount
cash-flow (DCF) is used to analysis the inventory model. The purpose of this
paper is to find an optimal ordering policy to minimizing the present value of
all future cash-flows cost by using DCF approach. The method to determine the
optimal ordering policy efficiently is presented. Some numerical examples are
provided to demonstrate the model and sensitivity of some important parameters
are illustrated the optimal solutions.
Keywords: two-level trade
credit, deteriorating items, order quantity dependent credit, discount
cash-flow, EOQ
Author: Hao Jiaqin, Mo
Jiangtao, Min Jie
Journal Code: jptkomputergg150186
