There are many payment terms used in supply chain system. The customer may need to pay before he receives the item (advance payment), or when the item is arrived (cash on delivery), and/or he may delay the payment for several period after receiving the item (credit payment). There are also a case when the vendor may give the customer the combination of 2 or 3 payment terms. This paper investigates the effect of payment schemes on the supply chain network design. The network consists of an outside supplier, multiple distribution center (DC)’s, and multiple retailers. The distribution centers receive an upstream ACC (Advance-cash-credit) payment from the supplier. The problem is to determine the optimum location, allocation, as well as the inventory cycle time with the objective function of minimize total cost. A continuous approximation is used in the model development, and the concept of time value of money concept is considered since different payment schemes related to time that may change the money value. The numerical example is used to demonstrate the solution approach. This paper provides modeling approach that supply chain network designer can use as a reference

There are many payment terms used in supply chain system. The customer may need to pay before he receives the item (advance payment), or when the item is arrived (cash on delivery), and/or he may delay the payment for several period after receiving the item (credit payment). There are also a case when the vendor may give the customer the combination of 2 or 3 payment terms. This paper investigates the effect of payment schemes on the supply chain network design. The network consists of an outside supplier, multiple distribution center (DC)’s, and multiple retailers. The distribution centers receive an upstream ACC (Advance-cash-credit) payment from the supplier. The problem is to determine the optimum location, allocation, as well as the inventory cycle time with the objective function of minimize total cost. A continuous approximation is used in the model development, and the concept of time value of money concept is considered since different payment schemes related to time that may change the money value. The numerical example is used to demonstrate the solution approach. This paper provides modeling approach that supply chain network designer can use as a reference

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