Supply chain models for perishable products under inflation and permissible delay in payment

In many inventory situations, purchasers are allowed a period to pay back f or the goods bought without paying any interest. Depending on the length of that payment period, the purchaser can earn interest on the sales of the i nventory. This paper develops a model to determine an optimal ordering poli cy for deteriorating items under inflation, permissible delay of payment an d allowable shortage. The present value of total cost incurred in this inve ntory system is developed first, then an optimal order quantity and maximum allowable shortage are obtained by using a search procedure. The effect of inflation and time value of money was investigated under given sets of inf lation and discount rates. This study shows that the optimal order quantity and maximum allowable shortage vary with the difference between inflation and time discount. Computational results provide some interesting policy im plications.