• INVENTORY POLICY UNDER TRADE CREDIT WHEN TIME OF PAYMENT IS UNCERTAIN

Abstract

This paper discusses the optimum order quantity of the EOQ model that is not only dependent on the inventory policy but also on firm’s credit policy. In practice, the supplier may simultaneously offer the retailer a permissible delay in payments to attract new customers and increases his/her sales and also a cash discount to motivate immediate payment and reduce credit expenses. However, not all the time retailer is able to pay within the trade credit period. Here we take into account the possibility of all situations like making the payment before and after the trade credit limit. We assume that the points could be random but with a trend. Models incorporate this through probability distribution functions. Since all cash outflows related to inventory control that occur at different points of time have different values, we use discount cash flow approach to establish an optimal ordering policies to the problem. The model is illustrated through numerical examples.