Advertisement

Optimal Cycle Time and Payment Option for Retailer

  • Poonam Mishra
  • Azharuddin ShaikhEmail author
  • Isha Talati
Conference paper
Part of the Advances in Intelligent Systems and Computing book series (AISC, volume 757)

Abstract

In business transaction, it is evident that offering a credit period to the end customers plays an effective role in boosting the demand. In addition, the high risk of default is associated with lengthier credit period. It is also a natural phenomenon that compared to advance payment, the offer of credit period accelerates the sales. Therefore, it is marked that lengthier credit period yields more sales with the risk of defaulters. On the other side, no default risk is associated with the advance payment. We link the above-mentioned scenario in this paper and formulate the mathematical model; the objective is to maximize retailer’s profit with payment period (amongst advance period, cash on delivery and credit period) and cycle time as a decision variable. To validate the model numerical examples are presented and sensitivity analysis of parameters is done to examine their effect on retailer’s decision.

Keywords

Advance payment Cash on delivery Permissible delay in payment 

References

  1. 1.
    Zhang, A.X.: Optimal advance payment scheme involving fixed pre-payment costs. Omega 24(5), 577–582 (1996)CrossRefGoogle Scholar
  2. 2.
    Mateut, S., Zanchettin, P.: Credit sales and advance payments: substitutes or complements? Econ. Lett. 118(1), 173–176 (2013)CrossRefGoogle Scholar
  3. 3.
    Zhang, Q., Tsao, Y.C., Chen, T.H.: Economic order quantity under advance payment. Appl. Math. Model. 38(24), 5910–5921 (2014)MathSciNetCrossRefGoogle Scholar
  4. 4.
    Goyal, S.K.: Economic order quantity under conditions of permissible delay in payments. J. Oper. Res. Soc. 36(4), 335–338 (1985)CrossRefGoogle Scholar
  5. 5.
    Shah, V.R., Patel, H.C., Shah, Y.K.: Economic ordering quantity when delay in payments of order and shortages are permitted. Gujarat Stat. Rev. 15(2), 51–56 (1988)Google Scholar
  6. 6.
    Mandal, B.N., Phaujdar, S.: Some EOQ models under permissible delay in payments. Int. J. Manage. Syst. 5(2), 99–108 (1989)MathSciNetGoogle Scholar
  7. 7.
    Mandal, B.N., Phaujdar, S.: An inventory model for deteriorating items and stock dependent consumption rate. J. Oper. Res. Soc. 40(5), 483–488 (1989).  https://doi.org/10.1057/jors.1989.75CrossRefzbMATHGoogle Scholar
  8. 8.
    Huang, Y.F.: Optimal retailer’s ordering policies in the EOQ model under trade credit financing. J. Oper. Res. Soc. 54(9), 1011–1015 (2003).  https://doi.org/10.1057/palgrave.jors.2601588CrossRefzbMATHGoogle Scholar
  9. 9.
    Shah, N.H., Soni, H., Jaggi, C.K.: Inventory models and trade credit [Review]. Control Cybern. 39, 867–884 (2010)MathSciNetzbMATHGoogle Scholar
  10. 10.
    Sarkar, B.: An EOQ model with delay in payments and time varying deterioration rate. Math. Comput. Model. 55(3), 367–377 (2012).  https://doi.org/10.1016/j.mcm.2011.08.009MathSciNetCrossRefzbMATHGoogle Scholar
  11. 11.
    Shah, N.H., Patel, D.G., Shah, D.B.: Optimal policies for deteriorating items with maximum lifetime and two-level trade credits. Int. J. Math. Math. Sci. 2014, 1–5 (2014).  https://doi.org/10.1155/2014/365929MathSciNetCrossRefzbMATHGoogle Scholar
  12. 12.
    Shaikh, A., Mishra, P.: Optimal ordering policies for retailer with fixed life time defective items under holding cost constraint. J. Basic Appl. Res. Int. 22(1), 8–16 (2017)Google Scholar
  13. 13.
    Mishra, P., Shaikh, A.: Optimal ordering policy for an integrated inventory model with stock dependent demand and order linked trade credits for twin ware house system. Uncertain Supply Chain Manage. 5, 169–186 (2017)CrossRefGoogle Scholar
  14. 14.
    Shaikh, A.S., Mishra, P.P.: Optimal policies for items with quadratic demand and time-dependent deterioration under two echelon trade credits. In: Shah, N., Mittal, M. (eds.) Handbook of Research on Promoting Business Process Improvement Through Inventory Control Techniques, pp. 32–43. Hershey, PA: IGI Global (2018)  https://doi.org/10.4018/978-1-5225-3232-3.ch002
  15. 15.
    Li, R., Skouri, K., Teng, J., Yang, W.: Sellers optimal replenishment policy and payment term among advance, cash, and credit payments. Int. J. Prod. Econ. 197, 35–42 (2018).  https://doi.org/10.1016/j.ijpe.2017.12.015CrossRefGoogle Scholar

Copyright information

© Springer Nature Singapore Pte Ltd. 2019

Authors and Affiliations

  • Poonam Mishra
    • 2
  • Azharuddin Shaikh
    • 1
    • 2
    Email author
  • Isha Talati
    • 2
  1. 1.Department of MathematicsInstitute of Infrastructure Technology Research and ManagementAhmedabadIndia
  2. 2.Department of Mathematics, School of TechnologyPandit Deendayal Petroleum UniversityGandhinagarIndia

Personalised recommendations