Manufacturer-retailer inventory model for deteriorating items with price-sensitive credit-linked demand under two-level trade credit financing and profit sharing contract

Abstract A supply chain of single manufacturer and single retailer is analyzed when units in warehouse are subject to deterioration at a constant rate. The demand is a decreasing function of selling price and increasing function of credit period offered by the retailer to the customers. Manufacturer follows a lot-for-lot production strategy. The manufacturer ensures delay payment to the retailer with agreement that the retailer will share a fraction of the profit realized during the credit period. The total joint profit of the supply chain is maximized with respect to replenishment time, selling price, and credit period. An algorithm is described to find the best strategy. Numerical examples are given to validate the proposed problem. Sensitivity analysis is carried out to examine important model parameters.

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