Three level partial trade credit with promotional cost sharing

Abstract

In this paper, an economic ordered quantity (EOQ) model, specifically for a newly launched product has been developed with selling price, customers’ credit period and customers’ credit amount induced demand under three levels of partial trade credit policy, where a supplier, a wholesaler and a retailer offer some credit periods on some fraction of the total purchased amount to the wholesaler, the retailer and the customer respectively. Also, here it is assumed that the retailer obtained a quantity discount from the wholesaler on purchased units above a certain level. In addition, the wholesaler and the retailer both enjoy freight charge discount according to the ordered quantity. Retailer introduces a promotional cost to increase the base demand of the item. Objective of this investigation is to maximize the profit of the retailer as well as the wholesaler. It is established that if the wholesaler contributes some portion of the promotional cost then individual profits as well as the joint profit increases. Due to the uncertainty and vagueness of different inventory costs, the proposed model is also discussed in fuzzy and rough environments. Combining the features of particle swarm optimization (PSO) and simulated annealing (SA) a hybrid algorithm named Particle Swarm-Simulated Annealing (PSSA) is developed to find the most appropriate strategies for the proposed model. Efficiency of this algorithm is tested and compared with PSO and genetic algorithm (GA) for a set of benchmark test problems. The model is illustrated with numerical examples and some managerial insights are outlined.