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Traditional Inventory System with Fixed Credit Period vs. Consignment Stock System with Equal Payments at Equal Intervals

Dellis, Adèle
(2016)

Files

Dellis_38161400_2016.pdf
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  • 1.36 MB

Details

Supervisors
Agrell, Per Joakim
Faculty
Louvain School of Management
Degree label
Master [120] en Ingénieur de gestion
Abstract
In the current economic context, building an inventory for a retailer represents a large investment, commonly causing financial distress. Faced with this situation, the seller is exposed to a great risk of default. This paper aims to analyse the effect of a consignment stock system with equal payments at equal intervals compared with traditional inventory system with fixed credit period. This analysis has demonstrated that the wholesaler will adopt a CS system when receiving the payments of the items sold at equal intervals as having the opportunity cost of the consigned inventory is more beneficial than selling all the items at the end of the cycle. While the retailer will adopt a traditional inventory system since buying all the items delivered (including the safety stock) at the end of the cycle is more beneficial than making payments at equal intervals upon the consumption over the cycle.