An Inventory Model under Conditional Trade Credits Depending on Payment Time

Abstract

This article wants to investigate the retailer’s optimal cycle time and optimal payment time under supplier credits including conditionally permissible delay in payments and cash discount depending on retailer payment time. That is, the retailer can obtain fully permissible delay in payments and cash discount if the payment is paid before the period of full delay payments permitted by the supplier. Otherwise, the retailer will just obtain partially permissible delay in payments within the period of partial delay payments permitted by the supplier. The supplier uses this policy to attract retailer to pay the payment as soon as possible to shorten its collection period. Mathematical models have been derived for obtaining the optimal cycle time and optimal payment time for item so that the annual total relevant cost is minimized. One theorem is developed to efficiently determine the optimal replenishment and payment policy for the retailer.