Abstract
In this paper, computer algorithms are developed for determining optimal purchasing strategies for firms that receive extended payment terms from vendors. The resultant models are particularly attractive in high-volume environments with extended payment terms, a high opportunity cost of capital, and relatively large inventory-related costs. It is shown that purchases of quantities smaller than the traditional Economic Order Quantity may be appropriate in these environments and other situations where vendors offer either all-units or incremental purchase price discounts. The resultant algorithms are solved in this study using a spreadsheet-based search procedure implemented on a personal computer.
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