Retailer’s optimal procurement plan considering random demand, delayed payment and cash discount

Abstract

Many inventory models have been established based on determined demand but ignore the fact that demand can be affected by random factors. A procurement model considering random demand, different trade credit and cash discount is established in this paper. Due to the randomness of demand, possibilities of salvage or stock out at the end of the cycle are considered, and these cases can be dealt as classic news vendor problem. The optimal procurement strategy for the expected profit is derived by some theoretical results in this paper, which are also illustrated by a series of numerical examples and the corresponding sensitivity analyses are also presented.