An inventory control system under deferrable delivery conditions

This paper explores an inventory control system for the optimal replenishment time under a trade–credit policy of type “α/Mα/M net TT”. It is different from the existing models is that during the time the account is not settled, all generated sales revenue is deposited in an interest bearing account. At the end of this period, the retailer pays the supplier the total amount in the interest bearing account and then starts paying off the amount owed to the supplier whenever the retailer has money obtained from sales. Firstly, we establish a proper model under the above condition. Then, a theorem is developed to determine the optimal ordering policies for the retailer if the supplier permits a payment delay to the retailer. The main contribution to the literature is the inclusion of the latter type of payment delay. A numerical experiment demonstrates the applicability of the theorem, and a sensitivity analysis shows the influence of key model parameters.