Abstract
Within the economic order quantity (EOQ) framework, the main purpose of this paper is to investigate the supplier optimal replenishment policy of permissible delay in payments. All previously published articles dealing with optimal order quantity with permissible delay in payments assumed that the supplier only offers the retailer fully permissible delay in payments if the retailer ordered a sufficient quantity. Otherwise, permissible delay in payments would not be permitted. However, in this paper, we want to extend this extreme case by developing the mathematical model for determining the cycle time. Under this condition, we model the retailers inventory system as a cost minimization problem to determine the retailers optimal inventory cycle time and optimal order quantity. Finally, numerical examples are given to illustrate all these cases and to draw managerial insights.
Highlights
We propose an original way to include sustainability criteria into inventory models
We formulate the classical economic order quantity (EOQ) model as multiobjective problem. We refer to this model as the sustainable order quantity model under permissible delay in payments
We would develop the mathematical model for determining the cycle time. With this mathematical model if we add the recent costs such as transportation cost which includes fuel cost and road construction cost, the total relevant cost for the retailer will be increased, we model the retailers inventory system as a cost minimization problem to determine the retailers optimal inventory cycle time and optimal order quantity
Summary
We propose an original way to include sustainability criteria into inventory models. Research on sustainability performance has considerably enriched operations management literature in recent years. Goyal [8] established a single item inventory model for determining the economic ordering quantity in the case that the supplier offers the retailer the opportunity to delay his payment within a fixed time period. Chung and Huang [6] extended Goyal [8] to consider the case that the units are replenished at a finite rate under permissible delay in payments and developed an efficient solutionfinding procedure to determine the retailers optimal ordering policy. Chung and Liao [7] dealt with the problem of determining the economic order quantity for exponentially deteriorating items under permissible delay in payments depending on the ordering quantity and developed an efficient solution-finding procedure to determine the retailers optimal ordering policy In this regard, Chang [4] extended Chung and Liao [7] by taking into account inflation and finite time horizon. Numerical examples are given to illustrate all these cases and to draw managerial insights
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