Optimal replenishment policies for deteriorating items and permissible delay in payments.

This paper examines the problem of finding an optimal replenishment policy for a single product inventory model with a finite planning horizon. Changes in inventory level are caused by deterioration of the product and a demand which varies with time, and the inventory holder is permitted to delay payment to the supplier of the product. A consequence of the latter feature is that the objective function in the resulting mixed integer non-linear programming problem does not possess the smoothness required for the straightforward application of techniques to be found in the literature to date. The authors overcome this difficulty by reducing an appropriate technique to its core mathematical essentials. It is shown that the optimization problem with a fixed number of replenishment periods has a unique global optimal solution, and that the corresponding optimal value is a strictly convex function of this number. Numerical examples are presented, and managerial implications are discussed. [ABSTRACT FROM AUTHOR]