Inventory model with dynamic demand under the permissible delay in payments

This paper develops an inventory model with dynamic demand under the permissible delay in payments. In this model, the shortage is not allowed. The purpose of the model is to determine the number, time and amount of orders, so that the total cost of the inventory system including ordering, holding and purchasing costs is minimized over a finite planning horizon. To calculate the optimal solution a heuristic algorithm based on differentiation approach is presented. Finally, algorithm performance and features of the model are discussed by a numerical example.