Article2007

Retailer's optimal ordering policies with trade credit financing

Jinn‐Tsair Teng · Chun‐Tao Chang · Maw‐Sheng Chern · Ya-Lan Chan

54 citations0/0 files storedInternational Journal of Systems Science

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Supply Chain and Inventory Management Sustainable Supply Chain Management Working Capital and Financial Performance

Abstract

In this article, we extended Goyal's model to develop an Economic Order Quantity (EOQ) model in which the supplier offers the retailer the permissible delay period M, and the retailer in turn provides the trade credit period N (with N ≤ M) to his/her customers. In addition, we assume that (1) the retailer's selling price per unit is necessarily higher than its unit cost, and (2) the interest rate charged by a supplier or a bank is not necessarily higher than the retailer's investment return rate. We then establish an appropriate EOQ model with trade credit financing, and provide an easy-to-use closed-form solution to the problem. Furthermore, we find it is possible that a well-established buyer may order a lower quantity and take the benefit of the permissible delay more frequently, which contradicts to the result by the previous researchers. Finally, we perform some sensitivity analyses to illustrate the theoretical results and obtain some managerial results.

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References

1985Economic Order Quantity under Conditions of Permissible Delay in Payments 1995Ordering Policies of Deteriorating Items under Permissible Delay in Payments 1997An ordering policy for deteriorating items with allowable shortage and permissible delay in payment 1977Fundamentals of Financial Management 2002On the economic order quantity under conditions of permissible delay in payments 2003Optimal retailer's ordering policies in the EOQ model under trade credit financing 1997Retailer's pricing and lot sizing policy for exponentially deteriorating products under the condition of permissible delay in payments 2000An inventory model with deteriorating items under inflation when a delay in payment is permissible

Cited by

2014Nash equilibrium solution in a vendor–buyer supply chain model with permissible delay in payments 2010A delayed payment method in co-ordinating a single-vendor multi-buyer supply chain 2017A supply chain with variable demand under three level trade credit policy 2018An economic order quantity model under two-level partial trade credit for time varying deteriorating items 2012A particle swarm optimization for solving lot-sizing problem with fluctuating demand and preservation technology cost under trade credit

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