Retailer Partial Trade Credit Research Articles

Optimal ordering policy for a retailer with consideration of customer credit under two-level trade credit financing

In practice, to promote sales and alleviate the default risk of customers, the retailer frequently offers its good credit customers full trade credit while offers bad credit customers partial trade credit. In other words, both types of customers receive a credit period simultaneously, but the bad credit customers must pay a fraction of the purchase cost at the time of buying productions as a collateral deposit. By contrast, for the sake of self-interest, the supplier chooses to provide the partial trade credit for its retailer on account of reducing the credit risk. Numerous researchers assume that the retailer has the powerful decision-making right and he/she can obtain the full trade credit, however, very few academicians have studied that the supplier offers the retailer partial trade credit, which is more realistic and significant. In this paper, we establish an economic order quantity model for a retailer who receives a partial trade credit by its supplier, and offers a full or partial trade credit to its good or bad credit customers respectively based on the cost minimization of the retailer. Then, the optimal ordering strategy of the retailer under different conditions is given. Finally, through numerical examples and sensitivity analysis, we derive the influence of related parameters on retailer’s order decision and managerial insights.

Closed-Form Solutions for the EPQ-Based Inventory Model for Exponentially Deteriorating Items Under Retailer Partial Trade Credit Policy in Supply Chain

Mahata (Expert Syst Appl 39(3):3537–3550, 2012) developed an economic production quantity (EPQ) inventory model for exponentially deteriorating items under permissible delay in payments considering that both demand and production are constant and known. This paper, applying well-known approximation mathematical expressions, derives closed-form formulas for the time at which the production ends, the cycle length and the total cost of inventory system. Moreover, this work presents a comparison of the solutions to the numerical examples by approximation closed-form formulas and Mahata (2012)’s method. The approximated method works properly because the percent of penalty is negligible less than 0.09%.

Optimal strategy for a manufacturer-retailer inventory system with defective items under retailer partial trade credit policy

In order to reduce default-risk, a retailer in practice frequently requests its credit risk customers to pay a part of the purchase amount as collateral deposit at the time of ordering, and then offers a trade credit for the outstanding balance (partial down-stream trade credit). In contrast, the retailer usually receives a full trade credit on the purchase amount from the manufacturer (up-stream full trade credit). The present study develops a single manufacturer single retailer integrated supply chain model under two-level trade credit in which the retailer receives a full trade credit from the manufacturer but offers a partial trade credit to its customers. The manufacturer delivers the retailer’s order quantity in a number of equal shipments. An arriving lot from the manufacturer contains a certain proportion of defective items. The market demand rate is sensitive to the length of the customer’s trade credit period which is offered by the retailer. The present study aims to determine the optimal replenishment cycle time, the order quantity and the number of lots from the manufacturer to the retailer such that the total profit of the integrated supply chain system is maximized. Solution algorithms are designed to find the optimal solution of the model. The theoretical results developed in the paper are illustrated through a numerical example. Sensitivity analysis of some important parameters is presented to study their influence on the optimal solution.

An EOQ inventory system of ameliorating items for price dependent demand rate under retailer partial trade credit policy

This paper studies the optimal ordering decision in the economic ordering quantity framework under two levels of trade credit policy where demand rate is a selling price dependent with ameliorating items whose value or utility or quantity increase over the time. In this paper, it is assumed that the retailer maintains a powerful decision-making right and can obtain the full trade credit offered by the supplier yet retailer just offers the partial trade credit to his/her customers. Furthermore, we consider that the items which were already sold but not yet paid for by customers would also incur interest charges or capital cost, which is not considered in the existing studies concerning retailer partial trade credit. For the objective function sufficient conditions for the existence and uniqueness of the optimal solution are provided. An efficient algorithm is designed to determine the optimal pricing and inventory policies for the retailer. Finally we obtain a lot of managerial insights from numerical examples. The results would provide valuable references for retailer in controlling the inventory of ameliorating items. The results also show that it is very necessary and realistic to consider the capital cost incurred by the items which were already sold but not yet paid for by customers under retailer partial trade credit policy.

A fuzzy framework for coordinating pricing and inventory policies for deteriorating items under retailer partial trade credit financing

In this paper, we proposed a generalized economic order quantity (EOQ) – based inventory model using a trade credit policy in a fuzzy sense. The trade credit policy adopted here is a two-level trade credit policy in which the supplier offers the retailer a permissible delay period M, and the retailer, in turn, partially provides customers a permissible delay period N. This study considers fuzzy EOQ model to allow for: (1) selling price dependent demand rate which is imprecise in nature, (2) a profit maximization objective and (3) an imprecise holding cost, ordering cost, purchasing cost, interest earned and interest charged rate. Besides, the cases N⩽M and N⩾M are explored thoroughly. The objective function for the retailer in fuzzy sense is defuzzified using Modified Graded Mean Integration Representation Method. For the defuzzified objective function sufficient conditions for the existence and uniqueness of the optimal solution are provided. An efficient algorithm is designed to determine the optimal pricing and inventory policies for the retailer. Finally, numerical examples are presented to illustrate the proposed model and the effect of key parameters on optimal solution is examined.

The optimal cycle time for deteriorating items under retailer partial trade credit policy in supply chain

Most dominant retailers can obtain the full trade credit offered by the supplier but these retailers only offer the partial trade credit to their customers. Thus, Huang and Hsu [2008. International Journal of Production Economics 112, 655-664] investigated the retailer's inventory policy under two levels of trade credit to reflect the supply chain management situation. In their model, it is assumed that the retailer receives the payment from the last customer at the time N and the goods are not perishable.In this paper, we extend the work of Huang and Hsu (2008) by taking the deterioration rate into account and modifying the assumption of payment receiving time. We change original time N, which is the payment of the last customer, to the correct time N + T. Two theorems are developed to determine the optimal cycle time and numerical examples are given to illustrate the results.

The optimal retailer's ordering policy under two levels of trade credit with partial payment financing to its customers

This study investigates the relationships among supplier, retailer and customer under two levels of trade credit and tries to find an optimal ordering strategy from retailer's standpoint. An inventory model has been established for a retailer who receives a full trade credit from its supplier, and offers a trade credit with due date and a partial payment (down payment) to its customers. In most researches relevant to trade credit, the payment method reveals that retailer pays off all units sold and keeps the profits for other uses. This paper, however, establishes the other payment method to make the model more practical, that is, the retailer pays off the amount owed to the supplier whenever the retailer has money obtained from sales. This paper generalizes Huang & Hsu's (2008) inventory model with retailer partial trade credit policy in supply chain under the other payment method to calculate the optimal cycle time, the annual total relevant cost, and optimal order quantity. Finally, a thorough sensitivity analysis is executed to investigate how various parameters affect results, and several research suggestions are demonstrated to facilitate further exploration in this topic.

Optimal strategy for an integrated inventory system involving variable production and defective items under retailer partial trade credit policy

This paper investigates an integrated inventory model with variable production rate and price-sensitive demand rate under two-level trade credit. The model considers two-level trade credit policy in which the retailer receives a full trade credit from its supplier, and offers partial trade credit to its customers. It is assumed that an arrival order lot may contain some defective items and the number of defective items is a random variable. This study attempts to offer a best policy for retail price, the replenishment cycle, and the number of shipment from the supplier to the retailer in one production run that aims at maximizing the joint expected total profit per unit time. An algorithm is designed to identify the optimum solution of the proposed model. Numerical examples are included to illustrate the algorithmic procedure and the effect of key parameters is studied to analyze the behavior of the model.

An EPQ-based inventory model for exponentially deteriorating items under retailer partial trade credit policy in supply chain

The main purpose of this paper is to investigate the optimal retailer’s replenishment decisions for deteriorating items under two levels of trade credit policy to reflect supply chain management situation within the economic production quantity (EPQ) framework. In this paper, it is assumed that the retailer maintains a powerful decision-making right and can obtain the full trade credit offered by the supplier yet retailer just offers the partial trade credit to his/her customers. Under these conditions, the retailer can obtain the most benefits. Then, we model the retailer’s inventory system as a cost minimization problem to determine the retailer’s optimal replenishment decisions under the supply chain management. Some easy-to-use theorems are developed to efficiently determine the optimal replenishment decisions for the retailer. We deduce some previously published results of other researchers as special cases. Finally, numerical examples are given to illustrate the theorems obtained in this paper. Then, as well as, we obtain a lot of managerial phenomena from numerical examples.

Optimal replenishment decisions in the EPQ model for deteriorating items with fuzzy cost components under retailer partial trade credit financing

In this paper, a realistic inventory model with imprecise inventory cost components have been formulated for deteriorating items under trade credit policy within the economic production quantity framework. It assumes that the retailer maintains a powerful position and can obtain full trade credit offered by supplier yet retailer just offers the partial trade credit to his/her customers under the replenishment rate is finite. Under these conditions, we model the retailer's inventory system as a cost minimisation problem to determine the retailer's optimal inventory policy. We derive the expressions for the annual total inventory cost for the retailer both in the crisp and fuzzy sense. The annual total variable inventory cost in the fuzzy sense is defuzzified using graded mean integration representation method and it has been proved that there exists a unique optimal cycle time to minimise the annual total variable cost for the retailer. In addition, two theorems and three algorithms are developed to efficiently determine the optimal ordering policies for the retailer. Some previously published results of other authors will be special cases of this paper. Finally, numerical examples are given to illustrate the theorems and obtain a lot of managerial insights from numerical examples.

Analysis of a fuzzy economic order quantity model for deteriorating items under retailer partial trade credit financing in a supply chain

This paper investigates the economic order quantity (EOQ) — based inventory model for a retailer under two levels of trade credit to reflect the supply chain management situation in the fuzzy sense. It is assumed that the retailer maintains a powerful position and can obtain the full trade credit offered by the supplier yet the retailer just offers a partial trade credit to customers. The demand rate, holding cost, ordering cost, purchasing cost and selling price are taken as fuzzy numbers. Under these conditions, the retailer can obtain the most benefits. Study also investigates the retailer’s inventory policy for deteriorating items in a supply chain management situation as a cost minimization problem in the fuzzy sense. The annual total variable cost for the retailer in fuzzy sense is defuzzified using Graded Mean Integration Representation method. Then the present study shows that the defuzzified annual total variable cost for the retailer is convex, that is, a unique solution exists. Mathematical theorems and algorithms are developed to efficiently determine the optimal inventory policy for the retailer. Numerical examples are given to illustrate the theorems and the algorithms. Finally, the results in this paper generalize some already published results in the crisp sense.

An EOQ model under retailer partial trade credit in two-echelon supply chain

In this paper, we want to investigate the retailer's inventory policy when the retailer maintains a powerful position in two-echelon supply chain. That is, we assumed that the retailer can obtain the full trade credit offered by the supplier yet the retailer just offers the partial trade credit to his/her customers under two-level trade credit situation. Then, we investigate the retailer's inventory system as a cost minimization problem to determine the retailer's optimal inventory policy in two-echelon supply chain. Finally, numerical examples are given to illustrate the results and to obtain managerial insights.

Comments on the EOQ model under retailer partial trade credit policy in the supply chain

Huang and Hsu [2007. An EOQ model under retailer partial trade credit policy in supply chain. International Journal of Production Economics, doi:10.1016/j.ijpe.2007.05.014] investigate the inventory system as a cost minimization problem to determine the retailer's optimal inventory policy under the supply chain. They develop two easy-to-use theorems to locate the optimal inventory policy for the retailer. Although their inventory models are correct and interesting, processes of arguments to derive those theorems to find the optimal inventory policy are not complete. So the main purpose of this paper is to overcome these shortcomings and present complete proofs for Huang and Hsu (2007).

An EOQ model under retailer partial trade credit policy in supply chain

The main purpose of this paper is to investigate the retailer's inventory policy under two levels of trade credit to reflect the supply chain management situation. In this paper, we assume that the retailer has the powerful decision-making right. So, we extend the assumption that the retailer can obtain the full trade credit offered by the supplier and the retailer just offers the partial trade credit to his/her customer. Then, we investigate the retailer's inventory system as a cost minimization problem to determine the retailer's optimal inventory policy under the supply chain management. Two easy-to-use theorems are developed to efficiently determine the optimal inventory policy for the retailer. We deduce some previously published results of other researchers as special cases. Finally, numerical examples are given to illustrate the theorems and obtain a lot of managerial phenomena.