Retailer's optimal order and credit policies when a supplier offers either a cash discount or a delay payment linked to order quantity

Chih-Te Yang · Qinhua Pan · Liang‐Yuh Ouyang · Jinn‐Tsair Teng

27 citations0/0 files storedEuropean J of Industrial Engineering

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

Abstract

To increase sales and reduce default risks, a supplier may offer its retailers either: 1 a cash discount 2 a fixed credit period M if the order quantity is greater than or equal to a predetermined quantity W. Likewise, a retailer in turn offers its customers a credit period N, which has a positive impact on its demand but a negative impact on its default risks. In this paper, we establish an inventory model for a retailer in a supply chain when a supplier offers either a cash discount or a delay payment linked to order quantity; meanwhile it offers its customers a permissible delay in payments. Then, we derive several theoretical results to determine the optimal solution under various situations and develop an algorithm to solve this complex inventory problem. Finally, several numerical examples are given to illustrate the theoretical results and provide some managerial insights.

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References

1995Ordering Policies of Deteriorating Items under Permissible Delay in Payments 1997An ordering policy for deteriorating items with allowable shortage and permissible delay in payment 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 2003A joint approach for setting unit price and the length of the credit period for a seller when end demand is price sensitive 2003An EOQ model for deteriorating items under supplier credits linked to ordering quantity 2007Retailer’s optimal replenishment decisions with credit-linked demand under permissible delay in payments

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2015Process is Unreliable and Quantity Discounts Supply Chain Integration Inventory Model 2016The influence of financial conditions on optimal ordering and payment policies under progressive interest schemes 2020Optimal replenishment and inventory financing strategy in a three-echelon supply chain under the variable demand and default risk

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