An uncooperative order model for items with trade credit, inventory-dependent demand and limited displayed-shelf space

Yong-Wu Zhou, Yuanguang Zhong and Jicai Li

European Journal of Operational Research, 2012, vol. 223, issue 1, 76-85

Abstract: This paper considers a two-echelon supply chain where a supplier sells a single product through a retailer, who faces an inventory-dependent demand. The supplier hopes to incentive the retailer to order more items by offering trade credit. The retailer places the ordered items on the display shelf (DS) with limited space and stocks the remaining items (if any) that exceed the shelf capacity in his/her backroom/warehouse (BW). From the supplier’s perspective, we focus mainly on under which conditions the supplier should offer trade credit and how he/she should design such trade credit policy and corresponding ordering policy to obtain much more benefits. From the retailer’s perspective, we discuss whether the retailer needs BW and exactly how many items need to be stocked in BW when the supplier offers trade credit. We formulate a “supplier-Stackelberg” game model, from which we obtain the conditions under which the presented simple trade credit policy not only increases the overall chain profit but also each member’s profit. We also show that the trade credit policy is always more beneficial to the retailer than to the supplier if it is offered.

Keywords: Inventory; EOQ model; Supply chain; Inventory-dependent demand; Trade credit (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:223:y:2012:i:1:p:76-85

DOI: 10.1016/j.ejor.2012.06.012

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