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An Eoq Model With Limited Storage Capacity Under Trade Credits

Author

Listed:
  • LIANG-YUH OUYANG

    (Department of Management Sciences and Decision Making, Tamkang University, Tamsui, Taipei 251, Taiwan)

  • KUN-SHAN WU

    (Department of Business Administration, Tamkang University, Tamsui, Taipei 251, Taiwan)

  • CHIH-TE YANG

    (Department of Industrial Engineering & Management, Ching-Yun University, Jung-Li 320, Taiwan)

Abstract

In the classical economic order quantity (EOQ) inventory model, it was assumed that the retailer must pay for the received items immediately. However, in practice, the supplier not only allows retailer to settle the account after a certain fixed period but also may offer a cash discount to encourage the retailer to pay for his purchases as soon as possible. On the other hand, it is common practice in most inventory systems to hold excess stocks in a rented warehouse whenever the storage capacity of the owned warehouse is insufficient. Therefore, the purpose of this paper is to establish an EOQ model with limited storage capacity, in which the supplier provides cash discount and permissible delay in payments for the retailer. In the model, we develop some useful theorems to characterize the optimal solution and provide a simple method to find the optimal replenishment cycle time and payment time. Finally, several numerical examples are given to illustrate the theoretical results and some managerial insights are also obtained.

Suggested Citation

  • Liang-Yuh Ouyang & Kun-Shan Wu & Chih-Te Yang, 2007. "An Eoq Model With Limited Storage Capacity Under Trade Credits," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 24(04), pages 575-592.
    • Handle: RePEc:wsi:apjorx:v:24:y:2007:i:04:n:s0217595907001371
    DOI: 10.1142/S0217595907001371
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    Citations

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    Cited by:

    1. R. Sundara rajan & R. Uthayakumar, 2017. "Comprehensive solution procedure for optimizing replenishment policies of instantaneous deteriorating items with stock-dependent demand under partial trade credit linked to order quantity," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 8(2), pages 1343-1373, November.
    2. Liang-Yuh Ouyang & Cheng-Ju Chuang & Chia-Huei Ho & Chien-Wei Wu, 2014. "An integrated inventory model with quality improvement and two-part credit policy," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 22(3), pages 1042-1061, October.
    3. Wu, Yaobin & Wang, Yingying & Xu, Xun & Chen, Xiangfeng, 2019. "Collect payment early, late, or through a third party's reverse factoring in a supply chain," International Journal of Production Economics, Elsevier, vol. 218(C), pages 245-259.

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