The retailer’s optimal decision on order quantity and credit periods under two-level trade credit policy

Fei Hu (), Cheng-Chew Lim and Zudi Lu

Journal of Global Optimization, 2015, vol. 62, issue 4, 833-852

Abstract: In this paper, we propose an inventory model under two-level trade credit policy, where the supplier offers quantity discounts and allows the retailer to choose the period of delay in payments that determines the unit purchasing cost, and so retailer’s unit purchasing cost is a function of both ordering quantity and his/her allowed credit period. Furthermore, the demand function is relevant to the credit period offered by the retailer to his/her customers. Our objective here is to maximize the retailer’s total profit per unit time by solving the optimal decision on ordering quantity and two credit periods. An effective algorithm is developed to determine the optimal solution to the problem. Numerical examples are provided to illustrate the impact of the model parameters on the optimal solutions. Copyright Springer Science+Business Media New York 2015

Keywords: Inventory; Two-level trade credit policy; Delay in payments; Quantity discounts (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/s10898-014-0258-z

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