Two-echelon trade credit financing for perishable items in a supply chain when demand depends on both selling price and credit period

A profitable decision policy between a supplier and the retailers can be characterized by an agreement on the trade credit scenario such as permissible delay in payments. In real life business, we observe that the demand is a function of both the selling price and credit period rather than the constant demand. Incorporating this demand function to the retailer of a supply chain, we develop an EPQ - based model for perishable items under two-echelon trade financing. The purpose of this paper is to maximize the profit by determining the optimal selling price, credit period and replenishment time. It is shown that the model developed by Jaggi et al. [Jaggi, J. K., Goyal, S. K., & Goel, S. K., 2008. Retailer's optimal replenishment decisions with creditlinked demand under permissible delay in payments. European Journal of Operational Research, 190, 130-135] can be treated as a special case of this paper. Finally, through numerical examples, sensitivity analysis shows the influence of key model parameters.

[1]  Nita H. Shah,et al.  Retailer's pricing, credit and inventory policies for deteriorating items in response to temporary price/credit incentives , 2003 .

[2]  Kun-Jen Chung,et al.  The optimal inventory policies under permissible delay in payments depending on the ordering quantity , 2005 .

[3]  James E. Ward,et al.  A Note on “Economic Order Quantity under Conditions of Permissible Delay in Payments” , 1987 .

[4]  S. Goyal,et al.  Optimal pricing and ordering policy under permissible delay in payments , 2005 .

[5]  Y.-F. Huang,et al.  Optimal retailer's ordering policies in the EOQ model under trade credit financing , 2003, J. Oper. Res. Soc..

[6]  Chun-Tao Chang.  An EOQ model with deteriorating items under inflation when supplier credits linked to order quantity , 2004 .

[7]  Kun-Jen Chung,et al.  THE OPTIMAL ORDERING POLICY IN A DCF ANALYSIS FOR DETERIORATING ITEMS WHEN TRADE CREDIT DEPENDS ON THE ORDER QUANTITY , 2006 .

[8]  B. Sarker,et al.  Optimal payment time for a retailer under permitted delay of payment by the wholesaler , 2000 .

[9]  S. K. Goyal,et al.  Retailer's optimal replenishment decisions with credit-linked demand under permissible delay in payments , 2008, Eur. J. Oper. Res..

[10]  Hark Hwang,et al.  Retailer's pricing and lot sizing policy for exponentially deteriorating products under the condition of permissible delay in payments , 1997, Comput. Oper. Res..

[11]  Yung-Fu Huang,et al.  Economic order quantity under conditionally permissible delay in payments , 2007, Eur. J. Oper. Res..

[12]  Mohamad Y. Jaber,et al.  Coordinating a two-level supply chain with delay in payments and profit sharing , 2006, Comput. Ind. Eng..

[13]  S. Aggarwal,et al.  Ordering Policies of Deteriorating Items under Permissible Delay in Payments , 1995 .

[14]  Peter Chu,et al.  Economic order quantity of deteriorating items under permissible delay in payments , 1998, Comput. Oper. Res..

[15]  S. Goyal.  Economic Order Quantity under Conditions of Permissible Delay in Payments , 1985 .

[16]  Yung-Fu Huang,et al.  AN EOQ MODEL UNDER RETAILER PARTIAL TRADE CREDIT POLICY IN SUPPLY CHAIN , 2008 .

[17]  Liang-Yuh Ouyang,et al.  Optimal pricing, shipment and payment policy for an integrated supplier-buyer inventory model with two-part trade credit , 2008, Eur. J. Oper. Res..

[18]  Kun-Jen Chung.  A theorem on the determination of economic order quantity under conditions of permissible delay in payments , 1998, Comput. Oper. Res..

[19]  B. Sarker,et al.  An ordering policy for deteriorating items with allowable shortage and permissible delay in payment , 1997 .

[20]  Jinn-Tsair Teng,et al.  Optimal manufacturer's replenishment policies in the EPQ model under two levels of trade credit policy , 2009, Eur. J. Oper. Res..

[21]  Jui‐Jung Liao.  An EOQ model with noninstantaneous receipt and exponentially deteriorating items under two-level trade credit , 2008 .

[22]  Yu-Chung Tsao.  Retailer's optimal ordering and discounting policies under advance sales discount and trade credits , 2009, Comput. Ind. Eng..

[23]  Jinn-Tsair Teng,et al.  On the economic order quantity under conditions of permissible delay in payments , 2002, J. Oper. Res. Soc..

[24]  C. Jaggi,et al.  A joint approach for setting unit price and the length of the credit period for a seller when end demand is price sensitive , 2003 .

[25]  Horng-Jinh Chang,et al.  An inventory model for deteriorating items with partial backlogging and permissible delay in payments , 2001, Int. J. Syst. Sci..

[26]  Jinn-Tsair Teng,et al.  Production, Manufacturing and Logistics Retailers optimal pricing and lot-sizing policies for deteriorating items with partial backlogging , 2004 .

[27]  Yung-Fu Huang.  An inventory model under two levels of trade credit and limited storage space derived without derivatives , 2006 .