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.
In present business culture, usually supplier offers a permissible delay in payments toretailer in order to stimulate his demand. However, while developing the inventory modelwith 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 revenuegenerated after fulfilling the outstanding demand as soon as his new consignment arrivesat the beginning of the cycle. Thus, the revenue along with the interest earn can be utilizedto 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 incurringinterest charges on the unpaid/overdue balance and the determination of a retailer’spay off time, after the expiring of credit period, is largely affected by his interest incomeand interest payable. Owing to these facts, a retailer cost minimization inventory modelhas been developed for each scenario which jointly optimizes the cycle length andstock-in period. The model has been validated with the help of numerical example. Sensitivityanalysis along with its economic interpretation has been also presented.
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