article

Inventory Policy and Trade Credit Financing

Authors:

Charles W. Haley,

Robert C. HigginsAuthors Info & Claims

Management Science, Volume 20, Issue 4-part-i

Pages 464 - 471

https://doi.org/10.1287/mnsc.20.4.464

Published: 01 December 1973 Publication History

Abstract

It is common business practice to purchase inventory on open account. Consequently, purchased inventory can be considered to be financed in whole or in part with trade credit. This paper investigates the relationship between inventory policy and trade credit policy in the context of the basic lot-size model. It demonstrates that, in general, optimality requires order quantity and payment time decisions determined simultaneously. The conditions under which the standard solutions are optimal are also developed.

References

[1]

ARROW, J. J., KARLIN, S., AND SCARF, H., Studies in the Mathematical Theory of Inventory and Production, Stanford, California: Stanford University Press, 1958.

Google Scholar

[2]

BAUMOL, W. J., "The Transactions Demand for Cash: An Inventory Theoretic Approach," Quarterly Journal of Economics, LXVI (November 1962), pp. 545-556.

Google Scholar

[3]

BERANEK, W., Working Capital Management, Belmont, California: Wadsworth, 1966.

Google Scholar

[4]

BERANEK, W., "Financial Implications of Lot-Size Inventory Models," Management Science, XIII (April 1967), pp. B401-8.

Digital Library

Google Scholar

[5]

HADLEY, G., AND WHITIN, T. M., Analysis of Inventory Systems . Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1963.

Google Scholar

[6]

MAGEE, J. F., Production Planning and Inventory Control . New York: McGraw-Hill, 1958.

Google Scholar

[7]

MAO, J. C. T., Quantitative Analysis of Financial Decisions, Toronto, Ontario: The Macmillan Company, 1969.

Google Scholar

[8]

NADDOR, E., Inventory Systems, New York: John Wiley and Sons, Inc., 1966.

Google Scholar

[9]

STARR, M. K., AND MILLER, D. W., Inventory Control: Theory and Practice, Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1962.

Google Scholar

Cited By

View all

Chen CJain NYang S(2023)The Impact of Trade Credit Provision on Retail InventoryManagement Science10.1287/mnsc.2022.460069:8(4591-4608)Online publication date: 1-Aug-2023
https://dl.acm.org/doi/10.1287/mnsc.2022.4600
Babich VKouvelis P(2022)Introduction to the Special Issue on Research at the Interface of Finance, Operations, and Risk Management (iFORM)Manufacturing & Service Operations Management10.1287/msom.2018.070620:1(1-18)Online publication date: 13-May-2022
https://dl.acm.org/doi/10.1287/msom.2018.0706
Gupta DChen Y(2020)Retailer-Direct Financing Contracts Under ConsignmentManufacturing & Service Operations Management10.1287/msom.2018.075422:3(528-544)Online publication date: 1-May-2020
https://dl.acm.org/doi/10.1287/msom.2018.0754
Show More Cited By

Inventory Policy and Trade Credit Financing
1. Applied computing
  1. Enterprise computing

Recommendations

Bank Lending, Inventory Financing and Trade Credit
WKDD '09: Proceedings of the 2009 Second International Workshop on Knowledge Discovery and Data Mining

We analysis bank lending and trade credit,and compare them with another new source,that is inventory financing. And we give empirical evidence and conclude that trade credit is more important for small firms, but these two sources can not satisfy all ...
Trade Credit, Risk Sharing, and Inventory Financing Portfolios

As an integrated part of a supply contract, trade credit has intrinsic connections with supply chain coordination and inventory management. Using a model that explicitly captures the interaction of firms' operations decisions, financial constraints, and ...
Optimal Inventory and Credit Policies under Two Levels of Trade Credit Financing in an Inventory System with Date-Terms Credit Linked Demand

Credit policy through its influence on demand indirectly affects the inventory policy which is designed to meet that demand; therefore inventory policy is interrelated with the credit policy. Consequently, they must be coordinated and should be ...

Comments

Please enable JavaScript to view thecomments powered by Disqus.

Information & Contributors

Information

Published In

Management Science Volume 20, Issue 4-part-i

December 1973

137 pages

ISSN:0025-1909

Issue’s Table of Contents

Publisher

INFORMS

Linthicum, MD, United States

Publication History

Published: 01 December 1973

Qualifiers

Article

Contributors

Other Metrics

View Article Metrics

Bibliometrics & Citations

Bibliometrics

Article Metrics

17
Total Citations
View Citations
0
Total Downloads

Downloads (Last 12 months)0
Downloads (Last 6 weeks)0

Reflects downloads up to 14 Feb 2025

Other Metrics

View Author Metrics

Citations

Cited By

View all

Chen CJain NYang S(2023)The Impact of Trade Credit Provision on Retail InventoryManagement Science10.1287/mnsc.2022.460069:8(4591-4608)Online publication date: 1-Aug-2023
https://dl.acm.org/doi/10.1287/mnsc.2022.4600
Babich VKouvelis P(2022)Introduction to the Special Issue on Research at the Interface of Finance, Operations, and Risk Management (iFORM)Manufacturing & Service Operations Management10.1287/msom.2018.070620:1(1-18)Online publication date: 13-May-2022
https://dl.acm.org/doi/10.1287/msom.2018.0706
Gupta DChen Y(2020)Retailer-Direct Financing Contracts Under ConsignmentManufacturing & Service Operations Management10.1287/msom.2018.075422:3(528-544)Online publication date: 1-May-2020
https://dl.acm.org/doi/10.1287/msom.2018.0754
Luo WShang K(2019)Technical Note—Managing Inventory for Firms with Trade Credit and Deficit PenaltyOperations Research10.1287/opre.2018.178767:2(468-478)Online publication date: 1-Mar-2019
https://dl.acm.org/doi/10.1287/opre.2018.1787
Chen XCai GSong J(2019)The Cash Flow Advantages of 3PLs as Supply Chain OrchestratorsManufacturing & Service Operations Management10.1287/msom.2017.066721:2(435-451)Online publication date: 1-May-2019
https://dl.acm.org/doi/10.1287/msom.2017.0667
Yang SBirge J(2018)Trade Credit, Risk Sharing, and Inventory Financing PortfoliosManagement Science10.1287/mnsc.2017.279964:8(3667-3689)Online publication date: 1-Aug-2018
https://dl.acm.org/doi/10.1287/mnsc.2017.2799
Chod J(2017)Inventory, Risk Shifting, and Trade CreditManagement Science10.1287/mnsc.2016.251563:10(3207-3225)Online publication date: 1-Oct-2017
https://dl.acm.org/doi/10.1287/mnsc.2016.2515
Abdul-Jalbar BColebrook MDorta-Guerra RGutiérrez J(2016)Centralized and decentralized inventory policies for a single-vendor two-buyer system with permissible delay in paymentsComputers and Operations Research10.1016/j.cor.2016.04.03074:C(187-195)Online publication date: 1-Oct-2016
https://dl.acm.org/doi/10.1016/j.cor.2016.04.030
Majumder PBera UMaiti M(2016)An EPQ model for two-warehouse in unremitting release pattern with two-level trade credit period concerning both supplier and retailerApplied Mathematics and Computation10.1016/j.amc.2015.10.057274:C(430-458)Online publication date: 1-Feb-2016
https://dl.acm.org/doi/10.1016/j.amc.2015.10.057
Bhunia AShaikh A(2015)An application of PSO in a two-warehouse inventory model for deteriorating item under permissible delay in payment with different inventory policiesApplied Mathematics and Computation10.1016/j.amc.2014.12.137256:C(831-850)Online publication date: 1-Apr-2015
https://dl.acm.org/doi/10.1016/j.amc.2014.12.137
Show More Cited By

Abstract

References

Cited By

Recommendations

Bank Lending, Inventory Financing and Trade Credit

Trade Credit, Risk Sharing, and Inventory Financing Portfolios

Optimal Inventory and Credit Policies under Two Levels of Trade Credit Financing in an Inventory System with Date-Terms Credit Linked Demand

Comments

Information

Published In

Publisher

Publication History

Qualifiers

Contributors

Other Metrics

Bibliometrics

Article Metrics

Other Metrics

Citations

Cited By

View options

Share

Share this Publication link

Share on social media

Affiliations