Retailer's optimal replenishment policy in a supply chain under partial trade credits and probabilistic supply disruptions

Abstract

Most of the traders' planning and their inventory control efforts are directed towards running efficient logistic operations under normal conditions. At the same time, global traders are facing random supply disruptions due to some unusual circumstances like earthquake, mishandling in transport, shipping damage, misplacing products etc. that may result a risk in delivery of items. Unlike the existing researches, this paper tries to investigate retailer's inventory system in a supply chain by considering: a) the probabilistic supply disruptions in transport from the supplier to a retailer; b) two-level partial trade credit financing. The supplier offers full trade credit to the retailer and the retailer offers partial trade credit to his customers. The mathematical model for the present scenario is constructed and total cost incurred at the retailer is minimised using one-dimensional optimisation procedures. Mathematical theorems and lemmas are developed to find out the necessary conditions for optimality. The optimal inventory replenishment policies and the optimised retailer's total cost are found out and illustrative numerical examples are presented. Managerial implications are obtained from the sensitivity analysis for various inventory key parameters.