IMPACT OF INFLATION AND CREDIT POLICIES ON A PRODUCTION LOT SIZE MODEL Page No: 243-249

Chandra K Jaggi and Aditi Khanna

Keywords: EPQ, inventory, inflation, trade credit, discounted cash flow.

Abstract: The main purpose of this paper is to study the impact of inflation and trade credit on a production lot size model, using a discounted cash flow (DCF) approach over an infinite planning horizon. A DCF approach permits a proper recognition of the financial implication of the opportunity cost and out-of-pocket costs in inventory analysis. It also permits an explicit recognition of the exact timing of the cash flows associated with an inventory system. Optimal solution for the model is derived and the effects of inflation and trade credit on the optimal replenishment policy are studied with the help of numerical example.



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