An inventory model under two levels of trade credit and limited storage space derived without derivatives

This paper tries to incorporate both Huang s model [Y.F. Huang, Optimal retailer s ordering policies in the EOQ model under trade credit financing, J. Oper. Res. Soc. 54 (2003) 1011–1015] and Teng s model [J.T. Teng, On the economic order quantity under conditions of permissible delay in payments, J. Oper. Res. Soc. 53 (2002) 915–918] by considering the retailer s storage space limited to reflect the real-life situations. That is, we want to investigate the retailer s inventory policy under two levels of trade credit and limited storage space. Furthermore, we adopt Teng s viewpoint [J.T. Teng, On the economic order quantity under conditions of permissible delay in payments, J. Oper. Res. Soc. 53 (2002) 915–918] that the retailer s unit selling price and the purchasing price per unit are not necessarily equal. Then, an algebraic approach is provided and three easy-to-use theorems are developed to efficiently determine the optimal cycle time. Some previously published results of other researchers can be deduced as special cases. Finally, a numerical example is given to illustrate these theorems and managerial insights are drawn. 2005 Elsevier Inc. All rights reserved.