Trade credit competition between two manufacturers in a two-echelon supply chain under credit-linked retail price and market demand

Abstract

This paper considers a two-echelon supply chain model in which two manufacturers produce the same product but compete with each other in offering trade credit to their common retailer. The retailer also offers trade credit to the end customer to enhance market demand. The retailer’s demand and retail price both vary with the length of the credit period. The supply chain’s profit function is derived considering all possible cases of the trade credit period offered by the manufacturers and the retailer. The model is demonstrated numerically with a suggested algorithm. It is observed that the whole supply chain’s profit is higher for shorter cycle time and higher retail price.