Modeling of a two echelon inventory system under trade credit with finite production rate

Abstract

The present competitive business situation, it has become typical of providing trade credit by the supplier (may be a manufacturer) to the vendor (may be a retailer) as part of improving the sales revenues. In this particular paper, development of a two echelon inventory model is proposed by considering a one supplier supplying a one kind of product to a one vendor under trade credit with finite production rate. The important aim of the proposed model is to exemplify the optimality of cycle time, inventory levels and total supply chain variable costs of the coordinated model. Ordering costs, carrying costs and transportation costs are considered for the proposed development of the model. The mathematical model is formulated in two fold: the expressions for total variable cost of the vendor and supplier are developed first and then for the entire supply chain. A solution procedure is developed and a MATLAB computer program is written to solve the model along with the sensitivity analysis is carried out.