Joint ordering policy for a conditional trade credit model with two retailers

Zhen Zhang, Song-Tao Zhang and Ming-Shi Yue

European Journal of Industrial Engineering, 2022, vol. 16, issue 4, 398-417

Abstract: This paper focuses on the cooperation mechanism between two retailers. To reduce the average processing cost, the supplier usually sets a threshold for trade credit to stimulate retailers' orders. Retailers can enjoy permissible delay in payments only when their order quantities are more than or equal to the given threshold. However, considering the diversity of retailers, the motivation effect of the threshold is limited. To resolve the problem, the supplier can additionally provide its retailers with a joint-ordering policy under which they can make delayed payments as long as their total order quantity meets the required threshold. We provide a mutually acceptable order-allocation scheme for two retailers, and determine the optimal payment methods for them. In addition, an optimal threshold is identified for the supplier to maximise the total order quantity of retailers. Based on this, some managerial insights are obtained. [Submitted: 27 February 2020; Accepted: 8 April 2021]

Keywords: inventory; economic order quantity; EOQ; supply chain management; conditional trade credit; joint-ordering policy; cooperation mechanism; non-cooperative game; tacit bargaining; recommended retail price; mathematical analytic tools and techniques. (search for similar items in EconPapers)
Date: 2022
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