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Periodic review (s, S) inventory model with permissible delay in payments

Author

Listed:
  • B S Maddah

    (Virginia Tech)

  • M Y Jaber

    (Ryerson University)

  • N E Abboud

    (American University of Beirut)

Abstract

This paper investigates the effect of permissible delay in payments on ordering policies in a periodic review (s, S) inventory model with stochastic demand. A new mathematical model is developed, which is an extension to that of Veinott and Wagner (Mngt Sci 1965; 11: 525) who applied renewal theory and stationary probabilistic analysis to determine the equivalent average cost per review period. The performance of the model is validated using a custom-built simulation programme. In addition, two distribution-free heuristic methods of reasonable accuracy develop approximate optimal policies for practical purposes based only on the mean and the standard deviation of the demand. Numerical examples are presented with results discussed.

Suggested Citation

  • B S Maddah & M Y Jaber & N E Abboud, 2004. "Periodic review (s, S) inventory model with permissible delay in payments," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 55(2), pages 147-159, February.
    • Handle: RePEc:pal:jorsoc:v:55:y:2004:i:2:d:10.1057_palgrave.jors.2601675
    DOI: 10.1057/palgrave.jors.2601675
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    References listed on IDEAS

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    Cited by:

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    2. Nasr, Walid W. & Maddah, Bacel, 2015. "Continuous (s, S) policy with MMPP correlated demand," European Journal of Operational Research, Elsevier, vol. 246(3), pages 874-885.
    3. Diwakar Gupta & Lei Wang, 2009. "A Stochastic Inventory Model with Trade Credit," Manufacturing & Service Operations Management, INFORMS, vol. 11(1), pages 4-18, November.
    4. Wei Luo & Kevin H. Shang, 2019. "Technical Note—Managing Inventory for Firms with Trade Credit and Deficit Penalty," Operations Research, INFORMS, vol. 67(2), pages 468-478, March.
    5. Kartikeya Puranam & David C. Novak & Marilyn Lucas, 2022. "Extending the newsvendor model to account for uncontrolled inventory transfers," Annals of Operations Research, Springer, vol. 317(1), pages 213-226, October.
    6. Tsao, Yu-Chung, 2019. "Coordinating contracts under default risk control-based trade credit," International Journal of Production Economics, Elsevier, vol. 212(C), pages 168-175.
    7. 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.
    8. Margarita Protopappa-Sieke & Ralf W. Seifert, 2017. "Benefits of working capital sharing in supply chains," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(5), pages 521-532, May.
    9. Tsao, Yu-Chung, 2017. "Managing default risk under trade credit: Who should implement Big-Data analytics in supply chains?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 106(C), pages 276-293.
    10. van der Vliet, Kasper & Reindorp, Matthew J. & Fransoo, Jan C., 2015. "The price of reverse factoring: Financing rates vs. payment delays," European Journal of Operational Research, Elsevier, vol. 242(3), pages 842-853.
    11. Protopappa-Sieke, Margarita & Seifert, Ralf W., 2010. "Interrelating operational and financial performance measurements in inventory control," European Journal of Operational Research, Elsevier, vol. 204(3), pages 439-448, August.
    12. Jianxin Chen & Yong-Wu Zhou, 2017. "A Risk-Averse Newsvendor Model Under Trade Credit Contract with CVaR," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 34(03), pages 1-20, June.

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