Decaying items inventory models with partial linked-to-order upstream trade credit and downstream full trade credit

Abstract

In practice, any member of supply chain may offer full or partial trade credit contract to his downstream level. Full trade credit is the case that the latter is allowed to defer whole payment to the end of credit period. In partial trade credit, however, the downstream supply chain member must pay for a proportion of the purchased goods at first, and can delay paying for the rest until the end of credit period. This paper considers a two-level trade credit, where the supplier offers order-quantity-dependent partial trade credit to a retailer, who suggests full trade credit to his customers. An economic order quantity (EOQ) inventory model of a deteriorating item with expiration dates is formulated here. Theoretical results are developed to obtain the optimal solutions to the problem. Numerical examples and sensitivity analysis are performed to justify the proposed models and theoretical results and managerial insights are provided.