Two Level of Trade Credit

Abstract

Abstract In this paper, an attempt is made to characterize the preservation technology for deteriorating items to reduce the deterioration rate. This model formulates an inventory model for deteriorating items, where demand depends on selling price and credit period offered by the retailer to the customers. Here, supplier allows a fixed credit period to the retailer to settle the account and retailer offers some trade credit to his customers. The concept of credit-linked demand develops a new inventory model under two levels of trade credit policy. A solution procedure is presented to determine an optimal replenishment cycle and total cost per unit time. Results have been validated with relevant example. In a way, the proposed model provides a unique theory to reduce the deterioration rate under two levels of trade credit policy. With the help of sensitivity analysis, impact of various parameters on the cycle length and total cost has been discussed.