Economics at your fingertips  

Optimal credit term, order quantity and selling price for perishable products when demand depends on selling price, expiration date, and credit period

Ruihai Li (), Jinn-Tsair Teng () and Yingfei Zheng ()
Additional contact information
Ruihai Li: Shanghai Lixin University of Commerce and Finance
Jinn-Tsair Teng: The William Paterson University of New Jersey
Yingfei Zheng: Shanghai University of International Business and Economics

Annals of Operations Research, 2019, vol. 280, issue 1, 377-405

Abstract: Abstract The demand for perishable goods (e.g., baked goods, fruits, vegetables, meat, milk, and seafood) is influenced by product freshness which gradually declines over time and can be perceived by its expiration date. Also, selling price is an important factor on demand. Furthermore, most modern companies offer their products on various credit terms to increase sales. However, relatively little attention has been paid to the combined effects of selling price, expiration date and credit term affecting demand. In this paper, a three-echelon supplier-retailer-consumer supply chain for perishable goods is explored in which the retailer receives an upstream full trade credit from the supplier while granting a downstream partial trade credit to credit-risk customers, with demand as a multiplicative form of selling price, expiration date, and credit period. The proposed model includes numerous previous models as special cases. The optimal credit term, order size and selling price are derived simultaneously for the retailer to achieve maximum profit. Several numerical examples are conducted to gain managerial insights. For example, if the credit efficiency of demand increases, then the retailer shall offer a longer downstream credit period to raise sales volume, which in turn implies the retailer can raise a higher price, order a larger quantity, and gain a higher total profit. Conversely, an increase in portion of cash payment results in a lower demand rate. Hence, the retailer orders less quantity and earns less profit while decreasing price to stimulate sales. Finally, conclusions and future research directions are provided.

Keywords: Inventory; Selling price; Trade credit; Perishable products; Expiration dates (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-11-06
Handle: RePEc:spr:annopr:v:280:y:2019:i:1:d:10.1007_s10479-019-03310-2