Supply chain model for the retailer's inventory policy under two levels of trade credit

Abstract

The main purpose of this paper is to investigate the retailer's inventory policy under two levels of trade credit to reflect the supply chain management situation. All previously published models implicitly assumed that the supplier would offer the retailer a delay period but the retailer would not offer the trade credit period to his/her customer. That is one level of trade credit. In most business transactions, this assumption is debatable. Recently, Huang (2003) assumed that the retailer also adopts the trade credit policy to stimulate his/her customer demand to develop the retailer's inventory model. That is two levels of trade credit. Furthermore, we assume that the retailer's unit selling price and the purchasing price per unit are not necessarily equal. This viewpoint can be found in Teng (2002). Under these conditions, we incorporate Huang (2003), and Teng (2002) to investigate the retailer's inventory system as a cost minimization problem to determine the retailer's optimal inventory policy under the supply chain management. Then two ease-touse theorems are developed to efficiently determine the optimal inventory policy for the retailer. Finally, numerical examples are given to illustrate these theorems obtained in this paper.

Keywords:

• EOQ
• inventory
• supply chain management
• two levels of trade credit
• permissible delay in payments