On optimal payment time for a retailer under permitted delay of payment by the wholesaler

Jamal et al. [2000. Optimal payment time for a retailer under permitted delay of payment by the wholesaler. International Journal of Production Economics 66, 59-66] study a wholesaler-retailer supply chain where the retailer is given a permissible credit period to pay back the dues without paying any interest to the wholesaler. The problem is modeled as a cost minimization problem with two decision variables: the payment time P of the retailer and the length of the inventory cycle T. While the model represents, in general, an interesting problem, we show in this note that there are a number of nontrivial flaws contained in the development of their model and therefore the solution they derived is not correct. We give the correct model and derive the corresponding optimal solution. (c) 2005 Elsevier B.V. All rights reserved.