A note on the optimal order and payment policies for deteriorating items in discount cash flows analysis under the alternatives of conditionally permissible delay in payments and cash discount

Abstract

Yang [C. T. Yang, The optimal order and payment policies for deteriorating items in discount cash flows analysis under the alternatives of conditionally permissible delay in payments and cash discount, TOP, vol. 18, p.429–443 used an alternate approach-discount cash flow (DCF) analysis to explore an inventory system for the optimal order time under two payment policies which the retailer can choice. If the retailer wants to enjoy the giveback of cash discount, then the outstanding balance must be paid at time M 1. Otherwise, the conditionally permissible is paid at time M 2. He develops some theoretical results to obtain the solution that provides the smallest present value of all future cash flows. However, processes of arguments to derive those theorems to find the optimal inventory policy are not complete. Consequently, this paper presents complete solution procedures for the system in that work and overcomes the shortcomings in the numerical examples.