Analysis of Permissible Delay in Payment Policy for Sustainable Business Development

Many retailers in developing countries have difficulty to make direct payment. As a consequence, the vendor has to offer delay in payment to keep sustainable order from his retailers and to attract the retailers to order larger quantity. In the other side, the vendor financial position has to be preserved to keep their financial safety. When time value money is considered, retailers get some additional profit from interest earned and the vendor get loss from interest cost. In this situation, the vendor wants to maximize his profit and financial health. In this paper, we develop a model of one vendor and many retailers with delay in payment and considering time value of money. Since the vendor has two contradictive goals, goal programming approach is used in the model and Genetic Algorithm (GA) approach is employed to solve the problem. A numerical example and sensitivity analysis with different retailer demand, retailer payment ability and vendor credit limit are shown to illustrate the model. The results show that vendor prefer to delivers products to retailer with high payment ability to achieve his goals.