Single-cycle policies for a single-vendor two-buyer system with permissible delay in payments
Date:
August 23-27, 2010. Co-authored with Abdul-Jalbar B, Gutiérrez J and Sicilia J. Book of Abstracts, page 76.
Abstract
In today’s competitive markets it is very common that supplier o”ers the buyers a delay of a fixed time period to settle the amount owed to him. This strategy is advantageous for the supplier not only because encourages customers to order more, but also attracts new customers. In addition, permissible delay in payments also has bene!ts for the buyers since they do not have to pay the vendor immediately after they receive the items. In contrast, the buyers can delay the payment until the end of the allowed period and during the credit period they can earn interest on the accumulated revenues. However, if the payment is not settled by the end of the credit period a higher interest is charged.
Most of the papers on inventory models with permissible delay in payments analyze the problem from the buyers point of view. That is, they focus on determining replenishment policies which minimize the total cost at the buyers without taking into account the total cost at the vendor. However, it is well-known that integrated inventory models usually have the advantage of reducing total cost. We can !nd many references in the literature dealing with the case where the vendor and the buyers collaborate and integrate their decision processes, but most of them assume that buyers pay the vendor as soon as they receive the items. In contrast, there are few contributions on the integrated model assuming permissible delay in payments and, in general, they are con!ned to considering a single buyer. The main goal of this paper is to extend the analysis to the case where the vendor supplies an item to two different buyers which face a constant deterministic demand. We assume that each shipment from the outside supplier to the vendor or from the vendor to the buyers incurs a fixed setup cost. In addition, at each facility there is a holding cost per unit stored and replenishments are instantaneous. Under these assumptions we formulate and solve the problem in terms of single-cycle policies.