Optimal ordering strategy with permissible delay in payments

This paper discusses an inventory impawn financing model with permissible delay in payments from the viewpoint of revenue management. We assume that a retailer has to make his ordering decision so as to maximize his average profit with only an initial budget of setup cost, while the supplier offers two means of payments: instantaneous payments or permissable delay in payments. If there exists a capital shortage, it is possible for the retailer to loan from a third party logistics (3PL) being able to provide financing services. The paper analyzes retailer´s possible ordering strategies and the corresponding optimal solutions.