Optimal ordering policy for deteriorating items under permissible delay in payments from the DCF approach

Abstract

This paper follows the discounted cash flow (DCF) approach to investigate inventory policies for deteriorating items taking account of time value of money in the presence of trade credit. In this study, we demonstrate that the present value of the total relevant cost PV∞ (T) is unimodal and differentiable. With the unimodality and differentiability of PV∞ (T), a theorem can be obtained to decide on the optimum time interval T *. Finally, numerical examples are used to illustrate all theoretical results of this paper.