Retailer’s Ordering Policy in a Supply Chain when Demand is Price and Credit Period Dependent

Chandra K. Jaggi and Amrina Kausar
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Chandra K. Jaggi: University of Delhi, India
Amrina Kausar: University of Delhi, India

International Journal of Strategic Decision Sciences (IJSDS), 2011, vol. 2, issue 4, 61-74

Abstract: Trade credit is a well established promotional tool in the present competitive world and its impact on demand cannot be ignored. Businesses often use trade credit to increase their market share and, in turn, the profit. Undoubtedly, trade credit plays a great role in increasing the demand but it also involves a great risk of non-payment. In order to reduce the risk of non-payment, businessman at times use a partial trade credit policy in which they demand a certain percentage of the total amount from the customer at the time of purchase and offers the credit for the remaining amount. Furthermore, it is also observed that the demand of FMCG is highly price sensitive. In order to see the effect of credit and price together, on demand, the retailer’s demand is taken as a function of price and credit period. Moreover it is assumed that the supplier offers the full credit to the retailer but the retailer passes a partial credit to customers. The inventory model, determines the optimal replenishment time, credit period, and price for the retailer that maximizes profit. Numerical examples have been provided to support the model followed by the comprehensive sensitivity analysis.

Date: 2011
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