Optimal pricing and ordering policies for perishable products under advance-cash-credit payment scheme

Yu‐Chung Tsao · Rizka Pricilia Fitriana Restu Putri · Chong Zhang · Vu-Thuy Linh

16 citations0/0 files storedJournal of industrial engineering international

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

Abstract

Recently, market globalization and competition have forced companies to find alternative means to boost sales and revenue. The use of the cash flow is increasingly becoming a viable alternative for managers to improve their company’s profitability in a supply chain. In today’s business transactions, a supplier usually asks a manufacturer to pay via the advance-cash-credit (ACC) payment scheme if the number of goods procured is high. Additionally, product perishability has been considered in an economic production quantity (EPQ) model since it is a real phenomenon. The present work develops an EPQ model for perishable products under the ACC payment scheme. The objective of the proposed model is to determine the optimal selling price and cycle time while maximizing profit under the ACC payment scheme using a discounted cash flow analysis. A nonlinear optimization algorithm is also proposed to solve the problem. In addition, some numerical examples are employed to illustrate the solution approach and show the concavity of the present value of the total annual profit in terms of both selling price and cycle time. The numerical results show that our proposal algorithm could be applied well to solve the problems. In addition, a sensitivity analysis is conducted to obtain some managerial insights. For example, if the impact of advance payment on procurement cost is relatively smaller than that of cash payment, then it is more profitable for the manufacturer to ask for a cash payment than to receive an advance payment and vice versa.

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References

1990How Many Parts to Make at Once 2002On the economic order quantity under conditions of permissible delay in payments 2012The Oxford Handbook of Entrepreneurial Finance 2003Economic production quantity models for deteriorating items with price- and stock-dependent demand 2003The optimal cycle time for EPQ inventory model under permissible delay in payments 2014An EOQ model with partial backordering and advance payments for an evaporating item 2009Optimal ordering policies for a retailer who offers distinct trade credits to its good and bad credit customers 2015Inventory models for deteriorating items with maximum lifetime under downstream partial trade credits to credit-risk customers by discounted cash-flow analysis

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2021Inventory Models for Non-Instantaneous Deteriorating Items with Expiration Dates and Imperfect Quality under Hybrid Payment Policy in the Three-Level Supply Chain

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