Retailer's economic order quantity model under trade credit period depending on the order quantity without calculus

In this study, the restrictive assumptions of the trade credit period independent of the order quantity and the retailer's unit selling price equaled to the purchasing price per unit are relaxed to fit real business situations. In 1985, Goyal considered the retailer's inventory replenishment problem under trade credit period independent of the order quantity and the retailer's unit selling price and the purchasing price per unit were equal. This article investigates the retailer's inventory problem under trade credit period dependent of the order quantity and the retailer's unit selling price not necessarily equals to the purchasing price per unit within the Economic Order Quantity (EOQ) framework. In addition, we use an easy and simple arithmetic-geometric mean inequality approach to determine the retailer's optimal ordering policy under minimizing the annual total relevant cost. This approach could therefore be used easily to introduce the basic inventory theories to younger students who lack the knowledge of calculus. Finally, numerical examples are given to illustrate the proposed model and its optimal solution. © 2008 Asian Network for Scientific Information.