Optimal pricing and ordering policy for an EPQ inventory system with perishable items under partial trade credit financing

Abstract

Achieving effective coordination among suppliers and retailers has become a pertinent research issue in supply chain management. A profitable decision policy between a supplier and the retailers can be characterised by an agreement on the trade credit scenario such as permissible delay in payments. Usually, in real life business, we observe that the demand depends on the selling price rather than the constant demand and supplier is willing to provide the retailer a full trade credit period for payments and the retailer just offers the partial trade credit period to his/her customers. In this paper, we develop an EPQ-based model for perishable items under retailer’s partial trade credit policy and price dependent demand. The purpose of this paper is to maximise the profit by determining the optimal selling price and replenishment time. Mathematical theorems are developed to determine optimal inventory policy for the retailer and numerical examples are given to illustrate the theory. We also obtain a lot of managerial phenomena.