On an EPQ model for deteriorating items under permissible delay in payments

Abstract

This paper derives a production model for the lot-size inventory system with finite production rate, taking into consideration the effect of decay and the condition of permissible delay in payments, in which the restrictive assumption of a permissible delay is relaxed to that at the end of the credit period, the retailer will make a partial payment on total purchasing cost to the supplier and pay off the remaining balance by loan from the bank. At first, this paper shows that there exists a unique optimal cycle time to minimize the total variable cost per unit time. Then, a theorem is developed to determine the optimal ordering policies and bounds for the optimal cycle time are provided to develop an algorithm. Numerical examples reveal that our optimization procedure is very accurate and rapid. Finally, it is shown that the model developed by Huang [1] can be treated as a special case of this paper.