Optimal ordering policies for deteriorating items using a discounted cash-flow analysis when a trade credit is linked to order quantity

In today’s competitive market, in order to obtain a competition advantage, the supplier often offers the purchaser a longer permissible delay in payments or a price discount if the order quantity is greater than or equal to a predetermined quantity. As a result, in this paper, we establish an inventory model for the purchaser in which the supplier provides different trade credits. We then solve the inventory problem by using a discounted cash-flow (DCF) approach, characterize the optimal solution, and obtain some theoretical results to find the optimal order quantity and the optimal replenishment time. Finally, we provide several numerical examples to illustrate the results.

Research highlights
► An EOQ model.
► A discounted cash-flow approach.
► Permissible delay in payments.
► Trade credit linked to order quantity.