IDEAS home Printed from https://ideas.repec.org/a/eee/apmaco/v252y2015icp541-551.html
   My bibliography  Save this article

An EOQ model with allowable shortage under trade credit in different scenario

Author

Listed:
  • Jaggi, Chandra K.
  • Yadavalli, V.S.S.
  • Verma, Mona
  • Sharma, Anuj

Abstract

In present business culture, usually supplier offers a permissible delay in payments to retailer in order to stimulate his demand. However, while developing the inventory model with shortages under permissible delay in payments, it has been observed, in the literature, that researcher have not considered the fact that retailer can earn interest on the revenue generated after fulfilling the outstanding demand as soon as his new consignment arrives at the beginning of the cycle. Thus, the revenue along with the interest earn can be utilized to pay off the amount at the of credit period. At this point of time there may be two scenarios, either he has enough amounts to settle the account with the supplier or delay incurring interest charges on the unpaid/overdue balance and the determination of a retailer’s pay off time, after the expiring of credit period, is largely affected by his interest income and interest payable. Owing to these facts, a retailer cost minimization inventory model has been developed for each scenario which jointly optimizes the cycle length and stock-in period. The model has been validated with the help of numerical example. Sensitivity analysis along with its economic interpretation has been also presented.

Suggested Citation

  • Jaggi, Chandra K. & Yadavalli, V.S.S. & Verma, Mona & Sharma, Anuj, 2015. "An EOQ model with allowable shortage under trade credit in different scenario," Applied Mathematics and Computation, Elsevier, vol. 252(C), pages 541-551.
    • Handle: RePEc:eee:apmaco:v:252:y:2015:i:c:p:541-551
    DOI: 10.1016/j.amc.2014.12.040
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0096300314016944
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.amc.2014.12.040?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Goyal, Suresh Kumar & Teng, Jinn-Tsair & Chang, Chun-Tao, 2007. "Optimal ordering policies when the supplier provides a progressive interest scheme," European Journal of Operational Research, Elsevier, vol. 179(2), pages 404-413, June.
    2. Chung, Kun-Jen & Huang, Yung-Fu, 2003. "The optimal cycle time for EPQ inventory model under permissible delay in payments," International Journal of Production Economics, Elsevier, vol. 84(3), pages 307-318, June.
    3. J-T Teng, 2002. "On the economic order quantity under conditions of permissible delay in payments," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 53(8), pages 915-918, August.
    4. Jamal, A. M. M. & Sarker, Bhaba R. & Wang, Shaojun, 2000. "Optimal payment time for a retailer under permitted delay of payment by the wholesaler," International Journal of Production Economics, Elsevier, vol. 66(1), pages 59-66, June.
    5. Teng, Jinn-Tsair & Chang, Chun-Tao & Goyal, Suresh Kumar, 2005. "Optimal pricing and ordering policy under permissible delay in payments," International Journal of Production Economics, Elsevier, vol. 97(2), pages 121-129, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Biswajit Sarkar & Waqas Ahmed & Seok-Beom Choi & Muhammad Tayyab, 2018. "Sustainable Inventory Management for Environmental Impact through Partial Backordering and Multi-Trade-Credit-Period," Sustainability, MDPI, vol. 10(12), pages 1-28, December.
    2. Yuhao Wang & Jiaxian Shen & Jinnan Pan & Tingqiang Chen, 2022. "A Credit Risk Contagion Intensity Model of Supply Chain Enterprises under Different Credit Modes," Sustainability, MDPI, vol. 14(20), pages 1-26, October.
    3. Chandan Mahato & Gour Chandra Mahata, 2023. "Optimal ordering policy under order-size dependent trade credit and complete backlogging derived algebraically," OPSEARCH, Springer;Operational Research Society of India, vol. 60(1), pages 420-444, March.
    4. Wang Luqi & Chen Zhijian & Chen Mingyao & Zhang Ruijie, 2019. "Inventory Policy for a Deteriorating Item with Time-Varying Demand Under Trade Credit and Inflation," Journal of Systems Science and Information, De Gruyter, vol. 7(2), pages 115-133, April.
    5. Tiwari, Sunil & Cárdenas-Barrón, Leopoldo Eduardo & Khanna, Aditi & Jaggi, Chandra K., 2016. "Impact of trade credit and inflation on retailer's ordering policies for non-instantaneous deteriorating items in a two-warehouse environment," International Journal of Production Economics, Elsevier, vol. 176(C), pages 154-169.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Teng, Jinn-Tsair, 2009. "Optimal ordering policies for a retailer who offers distinct trade credits to its good and bad credit customers," International Journal of Production Economics, Elsevier, vol. 119(2), pages 415-423, June.
    2. Teng, Jinn-Tsair & Min, Jie & Pan, Qinhua, 2012. "Economic order quantity model with trade credit financing for non-decreasing demand," Omega, Elsevier, vol. 40(3), pages 328-335.
    3. Jaggi, Chandra K. & Goyal, S.K. & Goel, S.K., 2008. "Retailer's optimal replenishment decisions with credit-linked demand under permissible delay in payments," European Journal of Operational Research, Elsevier, vol. 190(1), pages 130-135, October.
    4. Fei Hu & Cheng-Chew Lim & Zudi Lu, 2015. "The retailer’s optimal decision on order quantity and credit periods under two-level trade credit policy," Journal of Global Optimization, Springer, vol. 62(4), pages 833-852, August.
    5. Huang, Yung-Fu & Hsu, Kuang-Hua, 2008. "An EOQ model under retailer partial trade credit policy in supply chain," International Journal of Production Economics, Elsevier, vol. 112(2), pages 655-664, April.
    6. Ho, Chia-Huei & Ouyang, Liang-Yuh & Su, Chia-Hsien, 2008. "Optimal pricing, shipment and payment policy for an integrated supplier-buyer inventory model with two-part trade credit," European Journal of Operational Research, Elsevier, vol. 187(2), pages 496-510, June.
    7. Nita H. Shah & Nidhi Raykundaliya, 2009. "Optimal Inventory Policies for Weibull Deterioration under Trade Credit in Declining Market," Indus Journal of Management & Social Science (IJMSS), Department of Business Administration, vol. 3(2), pages 11-20, December.
    8. Ouyang, Liang-Yuh & Chang, Chun-Tao, 2013. "Optimal production lot with imperfect production process under permissible delay in payments and complete backlogging," International Journal of Production Economics, Elsevier, vol. 144(2), pages 610-617.
    9. Goyal, Suresh Kumar & Teng, Jinn-Tsair & Chang, Chun-Tao, 2007. "Optimal ordering policies when the supplier provides a progressive interest scheme," European Journal of Operational Research, Elsevier, vol. 179(2), pages 404-413, June.
    10. Chung, Kun-Jen & Liao, Jui-Jung, 2011. "The simplified solution algorithm for an integrated supplier-buyer inventory model with two-part trade credit in a supply chain system," European Journal of Operational Research, Elsevier, vol. 213(1), pages 156-165, August.
    11. Huang, Yung-Fu, 2007. "Economic order quantity under conditionally permissible delay in payments," European Journal of Operational Research, Elsevier, vol. 176(2), pages 911-924, January.
    12. Hardik Soni & Nita H. Shah, 2008. "Optimal Ordering and Trade Credit Policy for EOQ Model," Indus Journal of Management & Social Science (IJMSS), Department of Business Administration, vol. 2(1), pages 66-76, June.
    13. Musa, Abubakar & Sani, Babangida, 2012. "Inventory ordering policies of delayed deteriorating items under permissible delay in payments," International Journal of Production Economics, Elsevier, vol. 136(1), pages 75-83.
    14. Seifert, Daniel & Seifert, Ralf W. & Protopappa-Sieke, Margarita, 2013. "A review of trade credit literature: Opportunities for research in operations," European Journal of Operational Research, Elsevier, vol. 231(2), pages 245-256.
    15. D J Robb & E A Silver, 2006. "Inventory management under date-terms supplier trade credit with stochastic demand and leadtime," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(6), pages 692-702, June.
    16. Huang, Yung-Fu, 2007. "Optimal retailer's replenishment decisions in the EPQ model under two levels of trade credit policy," European Journal of Operational Research, Elsevier, vol. 176(3), pages 1577-1591, February.
    17. B. C. Giri & S. Sharma, 2016. "Optimal ordering policy for an inventory system with linearly increasing demand and allowable shortages under two levels trade credit financing," Operational Research, Springer, vol. 16(1), pages 25-50, April.
    18. Chang, Chun-Tao & Teng, Jinn-Tsair & Chern, Maw-Sheng, 2010. "Optimal manufacturer's replenishment policies for deteriorating items in a supply chain with up-stream and down-stream trade credits," International Journal of Production Economics, Elsevier, vol. 127(1), pages 197-202, September.
    19. Tsao, Yu-Chung & Sheen, Gwo-Ji, 2012. "A multi-item supply chain with credit periods and weight freight cost discounts," International Journal of Production Economics, Elsevier, vol. 135(1), pages 106-115.
    20. Ouyang, Liang-Yuh & Teng, Jinn-Tsair & Goyal, Suresh Kumar & Yang, Chih-Te, 2009. "An economic order quantity model for deteriorating items with partially permissible delay in payments linked to order quantity," European Journal of Operational Research, Elsevier, vol. 194(2), pages 418-431, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:apmaco:v:252:y:2015:i:c:p:541-551. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/applied-mathematics-and-computation .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.