Optimal replenishment policy for the EPQ model with permissible delay in payments and allowable shortages

The main purpose of this paper is to investigate the optimal replenishment policy under conditions of permissible delay in payments and allowable shortages within the economic production quantity (EPQ) framework. We extend the work of Chung and Huang [15] to assume that the replenishment rate is finite and the unit selling price is not necessarily equal to the unit purchasing price. A theorem is developed to determine the optimal replenishment policy. Finally, numerical examples are given to illustrate the theorem.