Optimality of Cycle Time and Inventory Decisions in a Two Echelon Inventory System with Price Dependent Demand under Credit Period

Abstract

Background/Objectives: This paper describes about the optimal values of the variables decision and function of objective of the entire supply chain under credit period with price dependent demand. Methods/Statistical Analysis: Initially the problem is framed with the expressions of the overall variable cost of the retailer and manufacturer is developed separately. Later the problem can be organised with the expressions of the overall variable cost of the retailer and manufacturer is developed for the entire supply chain as a function of retailers ordering costs and manufacturer set up costs along with carrying costs, and transportation cost. Findings: Numerical example is illustrated along with computer programme is solved in MATLAB. The model is solved for optimal values of cycle time, inventory level, number of shipments and the total annual cost of the individual entities and the entire supply chain. Also, the sensitivity analysis is carried out. From the research findings, it is evident that with credit period interpretation, the total annual cost is decreased with increase in trade credit. Applications/Improvements: Based on the research findings, it is concluded that total annual relevant cost of the supply chain becomes less, if the manufacturer permits to delay the retailer payments in more number of days.